One Energy ETF for Monthly Income and Growth

Energy infrastructure has become a hot-button topic in the discussion around the data center buildout. However, energy sector infrastructure stock prices have been hit- or-miss this year, as investor sentiment about the data center buildout swings from enthusiastic to negative.    

For example, here is the year-to-date chart for Kodiak Gas Services (KGS), which provides natural gas compression at the wellheads. It has been viewed as a distributed power supplier for data centers and other industrial customers.

The KGS chart shows how investor sentiment can swing wildly. Kodiak Gas Services is a fine company, but investor excitement pushed the stock to a high too fast in the      spring.

Companies that provide energy infrastructure, primarily from natural gas, are referred to as midstream companies. They own natural gas gathering, processing, and transport assets. Midstream energy companies also own and operate crude oil and fuels infrastructure assets.

One challenge with midstream investing is that many companies in the sector are organized as Master Limited Partnerships (MLPs). MLPs issue Forms K-1 for tax reporting, which makes income tax reporting a challenge. I avoid recommending K-1 reporting stocks to my subscribers.

My recommended midstream investment is the InfraCap MLP ETF (AMZA). This ETF primarily invests in MLPs, but also owns the better corporate midstream companies. The AMZA share price is up 27% year-to-date, and it has gained 82% over the last five years. On top of that, you get monthly dividends with a yield that is usually in the 8% to 9% range.  The result is a 177% total return over five years.

AMZA currently yields 8.0%. The dividend should increase by about 9% in January.

One thing to know if you are thinking about investing in AMZA soon: It declares dividends for November and December that get paid in early December, due to the fund’s tax reporting. So if you buy shares now, you’ll get three monthly dividends in January.