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Energy ETF Investing in Focus: AMLP's 7.7% Dividend or NLR's Nuclear Power Promise?

Via Motley Fool

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The Alerian MLP ETF (NYSEMKT:AMLP) provides a higher dividend yield and lower volatility than the VanEck Uranium and Nuclear ETF (NYSEMKT:NLR), though the VanEck fund maintains a lower expense ratio.

Investors often choose between these two funds when seeking energy sector exposure, but they target very different industries. Alerian MLP ETF focuses on master limited partnerships that manage pipelines and storage, while VanEck Uranium and Nuclear ETF tracks the global nuclear power supply chain.

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

Alerian MLP ETF is the more expensive option with a 1.01% expense ratio, compared to 0.52% for VanEck Uranium and Nuclear ETF. However, Alerian MLP ETF offers a much higher payout, with a yield gap of 4.67 percentage points.

Alerian MLP ETF is heavily concentrated in the energy sector, which accounts for 98% of its portfolio, with the remaining 2% in utilities. This non-diversified fund targets midstream infrastructure companies involved in the transportation and storage of energy commodities. Its largest positions include Sunoco at 12.6%, Plains All American Pipeline LP at 12.6% and MPLX at 12.5%. The fund was launched in 2010. Alerian MLP ETF has paid $4.07 per share over the trailing 12 months, which on its recent ~$52.6 share price works out to a 7.7% yield.

VanEck Uranium and Nuclear ETF provides exposure across energy at 46.5%, utilities at 33.4%, and industrials at 20%. The fund tracks the MVIS Global Uranium & Nuclear Energy Index and holds 28 securities, including uranium miners and power generation companies. Top holdings include Constellation Energy at 9.8%, Public Service Enterprise Group at 8.77%, and Cameco at 8.37%. It was launched in 2007. VanEck Uranium and Nuclear ETF has paid $3.17 per share over the trailing 12 months, which on its recent ~$103.4 share price works out to a 3.1% yield.

For more guidance on ETF investing, check out the full guide at this link.

Income investors will likely gravitate toward AMLP and its massive 7%-plus dividend, despite its higher fees. It's able to generate such large distributions because its portfolio is made up of master limited partnerships, which have a unique business model and tax structure that allow them to pay out more to shareholders. It's also a stable holding. It targets midstream infrastructure companies involved in the transportation and storage of energy commodities, which means the companies, and therefore the fund, are insulated from changes in the price of the materials. AMLP also provides another benefit over investing directly in MLPs -- it's structured as a C-corporation, which means you won't have to fill out additional paperwork at tax time.

If you're looking for growth, or just broader exposure to the entire energy market sector, you may be happier with NLR. The energy sector can be volatile, but NLR and the companies it holds could stand to benefit from the current AI data center build-out, as data centers require unprecedented amounts of energy, and many major technology companies are partnering with nuclear power providers to meet the need. Plus, its share price weakness over the past year may make it a compelling buy-the-dip candidate.

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Sarah Sidlow has positions in Alps ETF Trust - Alerian Mlp ETF. The Motley Fool has positions in and recommends Cameco and Constellation Energy. The Motley Fool has a disclosure policy.

Energy ETF Investing in Focus: AMLP's 7.7% Dividend or NLR's Nuclear Power Promise? was originally published by The Motley Fool

Read original at Yahoo Finance News

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