Want $7,000 a Year on $100K? These Pipelines Yield 7%+ While Your Cash Pays Less

Cash yields keep slipping further this year. The Fed has held the funds rate at a target range of 3.5% to 3.75% through mid-2026, the FDIC-reported national average on a 12-month CD sits at just 1.71%, and the 10-year Treasury has climbed to 4.72% as new Fed Chair Kevin Warsh signaled in late August that policymakers may have more work to do on inflation. That backdrop is why the Alerian MLP ETF (NYSEARCA:AMLP) keeps drawing buyers chasing income. AMLP currently yields roughly 7.3% on a portfolio of pipeline partnerships, pays quarterly, and issues a 1099 instead of the K-1 forms that scare retail investors away from owning MLPs directly. The yield case is real. The vehicle case is weaker than most AMLP holders realize.

Why income investors keep buying AMLP

This fund holds the largest U.S. midstream master limited partnerships in roughly equal weights, with top positions including MPLX at 12.76%, Sunoco at 12.26%, Western Midstream at 12.24%, Enterprise Products Partners at 12.23%, and Energy Transfer at 11.39%. These businesses collect fees for moving oil, gas, and natural gas liquids through pipelines and terminals, which helps insulate their cash flow from short-term swings in commodity prices. That insulation showed up in results: midstream MLPs broadly reported record volume throughput and robust demand for natural gas and natural gas liquids in the second quarter of 2026.

The fund’s two most recent quarterly distributions were $1.03 in May 2026 and $1.01 in February 2026, putting the trailing annual payout near $4.02 per share. A $100,000 position at the current yield would produce roughly $7,000 in annual cash income, well above anything available from a mainstream cash equivalent today. For context, AMLP’s total return in 2026 has also been strong, reaching roughly 25% year-to-date through late August, reflecting both the income stream and appreciation in pipeline valuations.

The hidden cost inside the wrapper

AMLP achieves its 1099 convenience by registering as a C corporation rather than as a regulated investment company. The fund itself owes corporate income tax on the partnership cash flows it receives and accrues a deferred tax liability against net asset value as those obligations build over time. That accrual is a permanent drag on NAV, not a one-time fee.

The expense ratio of 1.01% is only part of the total cost picture, because the deferred tax accrual sits on top of it. There is also tax friction on the distributions themselves. Because AMLP holds pure MLP partnerships, the majority of the fund’s payout has historically been taxed as ordinary income at the investor level rather than at the lower qualified-dividend rate. Both the structural tax drag and the expense ratio widen the gap between the headline yield and what a taxable investor actually keeps. The distributions also move with midstream cash flows rather than staying fixed like a CD coupon would.

A RIC-structured midstream alternative

The Global X MLP & Energy Infrastructure ETF (NYSEARCA:MLPX) solves the structural problem by design. It caps direct MLP exposure at under 25% and fills the remainder with midstream C-corps such as TC Energy, Enbridge, Williams, Kinder Morgan, and ONEOK, thereby qualifying as a regulated investment company. No fund-level corporate tax accrues against NAV. The expense ratio is 0.45%, roughly half of AMLP’s. The trailing yield runs near 4%, a meaningful step down from AMLP’s but without the deferred-tax drag that suppresses AMLP’s NAV over time.

The tradeoffs are not trivial

An MLPX investor on the same $100,000 collects closer to $4,000 in annual distributions at the current yield, roughly $3,000 less in cash than AMLP. A retiree drawing distributions to cover living expenses may find that gap difficult to ignore. MLPX also leans more heavily on Canadian midstream names like Enbridge and TC Energy, which carry currency and cross-border tax considerations that AMLP avoids entirely.

Selling AMLP in a taxable account can trigger capital gains and recapture the deferred tax liability that has been quietly suppressing NAV. The Alerian Energy Infrastructure ETF (NYSEARCA:ENFR) is the cheaper RIC-structured alternative, with a 0.35% expense ratio and a trailing yield in the 3.9% to 4.1% range, for investors who want a closer index-style midstream basket without the C-corp tax burden.

Sizing a potential rotation

Holders with AMLP in an IRA can rotate without a tax bill. In a taxable account, a partial rotation or directing new contributions to MLPX or ENFR rather than adding to AMLP sidesteps a lump-sum gain event. The dollar-income gap shrinks meaningfully if a portion of the position stays in AMLP for the yield while new capital builds a RIC-structured sleeve alongside it. That layered approach lets income investors keep the quarterly check they depend on while gradually reducing the deferred-tax overhang tied to the C-corp wrapper.

What it suggests right now

AMLP still does the one job income buyers ask of it: converting pipeline cash flow into a 7%-plus quarterly check that arrives on a 1099. The fund’s strong total return in 2026 has rewarded existing holders, and the broader midstream sector’s record throughput volumes provide a solid underlying cash-flow base. For investors whose primary goal is maximizing total return on midstream exposure, though, the C-corp wrapper carries structural costs that compound over time compared with an RIC-structured alternative. The case for at least a partial shift is worth weighing against each investor’s personal tax situation and income requirements.

Editor’s note: This article updates the 10-year Treasury yield to 4.72% (from 4.51%), the FDIC national average 12-month CD rate to 1.71% (from 1.65%), AMLP’s trailing yield to approximately 7.3% (from 7.78%), and AMLP’s expense ratio to 1.01% (from 0.84%), all reflecting data as of late August 2026. It also adds context on midstream sector Q2 2026 results, AMLP’s roughly 25% YTD total return, and the influence of new Fed Chair Kevin Warsh’s hawkish remarks on Treasury yields. MLPX’s yield is updated to approximately 4% and ENFR’s yield to approximately 3.9% to 4.1%.

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