UBS Hikes ETRACS Alerian Distribution
UBS Investment Bank announced a 3.3% increase in the coupon payment for the ETRACS Alerian MLP Index ETN (NYSE: AMU – $27.91). The current quarterly payout payable on September 16 will be $0.3543 up from last quarter’s $0.3429. This distribution brings the annualized yield for AMU to 5.08%. Again, it’s worth noting that the operations of the master limited partnerships (MLPs) contained in the index tracked by the ETN are relatively stable; they generate fee-based revenue that doesn’t depend much on spot prices for oil and gas, and the current tax code incentivizes them to pay out substantial portions of current earnings in the form of dividends. The index is not to be considered a vehicle for capital appreciation, although as the domestic economy improves more and more energy suppliers will use these companies’ storage facilities and pipelines to house and transport their product which will be reflected in higher earnings and, ultimately, their individual stock prices. That said, the MLPs’ main appeal comes from their above-average payouts and UBS’ ETRACS Alerian Index exchange traded note that tracks fifty such partnerships can continue to be held in a well diversified income portfolio.