Retirees Are Choosing AMLP Over Traditional Dividend Funds For One Clear Reason: Double The Income

The Alerian MLP ETF (NYSEARCA:AMLP) offers an 8.29% dividend yield when traditional dividend stocks struggle to reach 4% and the S&P 500 barely tops 1%. For income-focused investors, AMLP provides access to master limited partnerships operating critical energy infrastructure across the United States.

AMLP generates income by holding equity stakes in MLPs, which are pass-through entities that distribute the majority of their cash flow to unitholders. These partnerships operate pipelines, storage facilities, and processing plants for crude oil, natural gas, and refined products. Because MLPs don’t pay corporate income taxes, they can distribute higher yields than traditional corporations. The ETF’s top six holdings represent 77% of the portfolio, providing concentrated exposure to industry leaders.

Evaluating the Top Holdings

AMLP’s yield sustainability depends directly on the distribution strength of its largest positions. Each operates fee-based business models that generate stable cash flows regardless of commodity price fluctuations.

MPLX (NYSE:MPLX), the largest holding at 13.57%, recently increased its quarterly distribution by 12.5% to $1.0765 per unit. The partnership maintains distribution coverage of 1.3x, generating 30% more cash than it pays out. With Q3 adjusted EBITDA of $669 million and a 41.4% profit margin, MPLX demonstrates exceptional financial strength. The partnership has grown distributions consistently since 2016 without cuts during the 2020 crisis.

Enterprise Products Partners (NYSE:EPD) at 12.66% exemplifies dividend aristocrat quality with 25 consecutive years of distribution increases. Its 1.22x coverage ratio and $69.7 billion market cap provide stability. Energy Transfer (NYSE:ET) has increased distributions nine consecutive quarters, reaching $0.3325 after recovering from 2020 cuts.

Western Midstream (NYSE:WES) grew distributions 82% over three years to $0.91 quarterly, while Plains All American (NASDAQ:PAA) raised payouts 75% since 2022. Sunoco (NYSE:SUN) maintains 1.8x coverage with recent acquisition activity strengthening its position.

Total Return Considerations

AMLP’s price declined 3.87% over the past year, but the 8.29% yield delivers positive total returns around 4.4%. The five-year performance shows 68% gains, indicating the current yield reflects genuine distribution strength rather than distressed pricing. But it is important for investors to consider this, as so often high income investments come at the cost of modest, or even negative total returns when factoring in inflation and share price deterioration. 

Alternative Option

Investors seeking similar exposure should consider the Global X MLP ETF (NYSEARCA:MLPA), which offers an 8.01% yield with a lower 0.45% expense ratio compared to AMLP’s 0.85%. MLPA holds 20 positions versus AMLP’s more concentrated approach, providing broader diversification within the MLP space. The fund generates income through the same MLP structure, offering comparable high-yield exposure with reduced fees.