Midstream dividend ETFs are an underrated way to derive income from the stock market, mainly because Wall Street is still overlooking them. ETFs like the Alerian MLP ETF (NYSEARCA:AMLP), USCF Midstream Energy Income Fund (NYSEARCA:UMI), and Global X MLP ETF (NYSEARCA:MLP) have outperformed most classic income vehicles, and have sometimes done so with double the yield.
Midstream energy companies include pipeline operators and storage facility owners that transport oil and natural gas from production sites to refineries and end users. These companies are not exposed to the day-to-day swings of energy prices and instead operate on volume-based fees. This business model has allowed them to maintain generous dividend payments even during volatile energy markets while still delivering returns that have outpaced broader indexes.
North American midstream companies are becoming very successful post-2022 as the U.S. has turned into Europe’s largest source of energy. There’s plenty of oil flowing through pipelines, and the demand is sticky.
The following three midstream dividend ETFs are exactly why this sector deserves a closer look from income-focused investors.
Alerian MLP ETF (AMLP)
The Alerian MLP ETF pays the highest yield among major midstream ETFs and is one of the largest funds in the sector. It is a capped, float-adjusted, capitalization-weighted index of energy infrastructure Master Limited Partnerships. These companies get most of their cash flow from midstream businesses.
AMLP has historically been a poor investment, especially in the 2010s, as energy businesses faced headwinds across the board. However, it has started the 2020s on a very strong note.
Its top 6 holdings get ~13% of the fund each, and all of them have performed well. The top holding is Energy Transfer LP (NYSE:ET), which is up 9.7% in just the past month alone.
AMLP’s strongest suit is the income. You get a 7.73% dividend yield. The expense ratio is 0.85%, which is on the higher end, but the yield more than makes up for it. Keep reinvesting that near-8% yield, and you could see your portfolio snowball significantly. There’s one drawback, though. The dividend payout frequency is quarterly.
USCF Midstream Energy Income Fund (UMI)
The USCF Midstream Energy Income Fund is great if you want a monthly payout plus more capital gains. UMI is an actively managed ETF that can own both C‑corp midstream names and ultra-high-yield MLPs. This is why you get a somewhat lower headline cash yield of 5.65%. However, it is up nearly 12.2% in just the past month, so I expect strong performance on top of that yield. There’s plenty of overlap between UMI and AMLP, but this ETF gives its top 10 holdings lower concentrations.
You’re getting exposure to equities beyond just MLPs. UMI is the only major ETF you can buy that gets you a monthly yield north of 5% with solid midstream exposure.
The expense ratio is 0.69%.
Global X MLP ETF (MLPA)
This is one of the most recognizable midstream ETFs out there. It’s the most suitable for you if you don’t like a high expense ratio and you’re willing to sacrifice a little bit of yield for a lower expense ratio. You get a 7.28% dividend yield, a quarterly dividend payout, and a roster of holdings that are hard to tell apart from those of AMLP’s.
So, what’s the difference? Why buy this and not AMLP?
I’d argue both are what buying. But if you want maximum simplicity, scale, and liquidity and are comfortable with a heavier tax drag baked into the vehicle, AMLP is the older, larger product with a long, well‑documented track record and a slightly higher nominal yield.
If you care more about minimizing effective costs and getting closer to index tracking in a C‑corp MLP wrapper, MLPA’s lower headline fee and somewhat leaner structure make it the more cost‑efficient choice on paper, with a still‑high but slightly lower distribution yield.
The expense ratio is just 0.45%.
