From the 1980s until crude oil crashed in 2015, the master limited partnership (MLP) structure dominated energy midstream—your gathering, pipeline, processing, and storage companies. Midstream revenues come from committed fee structures and are very predictable and MLPs pay tax-advantaged distributions, so the structure can be very profitable for the sponsor/general partner/owner.
But many investors don’t want the tax hassles of owning partnership units, and after the energy sector went through tremendous upheaval from late 2014 to early 2016, when crude oil went from over $100 per barrel to $30, a lot of midstream companies were pushed into more familiar corporate business structures. Many corporate sponsors of MLPs chose to absorb the partnerships into their corporations.
Investors buy midstream stocks for attractive yields and growing dividend rates. Dividend growth produces steady share price appreciation, too.
This post originally appeared at Investors Alley.