The energy infrastructure sector has continued to decline, even as the price of crude oil has climbed and stabilized. This sector is populated by the publicly traded master limited partnerships (MLPs) and corporations that for the most part function like their MLP brethren. Over the last three months, crude oil is up about 5%, yield the Alerian MLP Infrastructure Index (AMZI) has dropped by over 10%. If you like to invest in turn around candidates, there are strong signs that MLPs and related companies will start to turn higher.
Underlying energy infrastructure fundamentals look stable and expectations are that most MLPs have businesses continue to grow. In the second quarter, two-thirds of the AMZI component companies increased distributions, with the remainder keeping payouts level. For the third quarter, a pair of distribution cuts have been announced. These reductions are strategic versus signs of desperation. My forecast is that the majority of MLPs will announce distribution increases, including these three.