Retirees Chasing AMLP's 7.9% Distribution Should Know About The Coverage Gap Risk

"The Alerian MLP ETF ( NYSEARCA:AMLP) offers retirees a 7.9% yield through master limited partnerships in energy infrastructure. The fund has significantly increased distributions as natural gas demand surged and pipeline operators benefited from higher utilization rates following the pandemic recovery and European energy crisis, with payouts growing substantially as energy infrastructure assets proved their resilience. How AMLP Generates Income AMLP invests in MLPs that own pipelines, storage facilities, and processing plants."

"The portfolio is highly concentrated, with the top 6 holdings representing approximately 77% of assets. AMLP's distribution sustainability depends heavily on whether these core holdings maintain their payouts. Distribution Safety: Evaluating the Top Holdings Three MLPs drive the fund's income: Energy Transfer ( NYSE:ET) at 13%, Enterprise Products Partners ( NYSE:EPD) at 13%, and MPLX ( NYSE:MPLX) at 12%. Together, these three holdings account for 38% of the portfolio, making their distribution sustainability critical to the fund's overall income stability."

"Energy Transfer demonstrates the strongest coverage, with $11.5 billion in operating cash flow comfortably supporting its $1.32 annual distribution. MPLX follows a similarly conservative approach, generating $5.9 billion in operating cash flow against a $3.6 billion distribution requirement. Enterprise Products Partners presents a concerning pattern-the partnership distributed $4.5 billion to unitholders while generating only $3.6 billion in free cash flow. This coverage gap represents a structural weakness that could pressure future distribu"

AMLP yields 7.9% by investing in MLPs owning pipelines, storage and processing assets that collect transportation and storage fees, producing predictable cash flow. The ETF passes quarterly distributions to shareholders after a 0.85% expense ratio. The portfolio is concentrated: the top six holdings are ~77% of assets, and three MLPs (Energy Transfer 13%, Enterprise Products Partners 13%, MPLX 12%) account for 38% of assets. Energy Transfer and MPLX show strong cash-flow coverage, while Enterprise Products Partners distributed $4.5 billion despite producing $3.6 billion in free cash flow, creating a coverage gap that could pressure future distributions.

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