The midstream energy sector has reinforced its reputation as a reliable source of income for investors. Key industry players have announced sequential increases to their latest payouts. These distribution hikes underscore the fundamental strength of energy infrastructure companies and their ability to generate attractive income for investors.

Key Takeaways:

• Targa Resources (TRGP) and Sunoco LP (SUN) led the quarter with significant payout increases of 25% and 6.25%, respectively.
• A broad range of midstream constituents, including Western Midstream (WES) and Kinder Morgan (KMI), grew their payouts.
• The growth in underlying dividends provides a fundamental tailwind for midstream ETFs like AMLP and ENFR.

Targa & Sunoco Lead the Charge

The primary highlights of the current cycle include significant payout increases from Targa Resources Corp (TRGP) and Sunoco LP (SUN). Targa Resources followed through on its previous guidance, boosting its quarterly dividend by 25% to $1.25 per share, up from the $1.00 paid in the prior quarter. Targa currently stands as a top 10 holding in the Alerian Energy Infrastructure ETF (ENFR), which provides exposure to the Alerian Midstream Energy Select Index (AMEI). AMEI was yielding 4.8% as of April 28 .

Sunoco LP also made headlines by announcing a 6.25% increase in its quarterly distribution to $0.9899 per unit. This move is particularly notable as it includes a one-time 5% step-up alongside a standard 1.25% quarterly increase. Sunoco’s capital allocation strategy includes a multi-year distribution growth rate of at least 5%. As the top holding in the Alerian MLP ETF (AMLP) in late April, Sunoco’s payout growth provides a substantial tailwind for the fund’s yield.. AMLP tracks the Alerian MLP Infrastructure Index (AMZI), which was yielding 7.1% as of April 28.

Broad-Based Increases Across the Midstream Space

The momentum extended to several other major midstream operators. Western Midstream Partners (WES) increased its distribution by 2.2% to $0.93, while Kinder Morgan (KMI) raised its payout by 1.7% to $0.2975. Hess Midstream (HESM) continued its consistent growth trajectory with an increase of 2.0% to $0.7792 per share. Energy Transfer (ET) and Delek Logistics Partners (DKL), continued their pattern of smaller, consecutive quarterly hikes, raising payouts by less than 1% to $0.3375 and $1.13, respectively.

Investors can access these names through ENFR, which offers broader exposure to the entire midstream segment, or through AMLP, which includes SUN, ET, WES, HESM, and DKL. Approximately 90% of holdings by weighting for both ENFR and AMLP have increased their payouts within the last year. Importantly, there has not been a cut to a regular dividend for a name in AMLP or ENFR since July 2021.

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