The Advisor’s Guide to Buybacks in Energy Infrastructure


While midstream investing is known to offer big dividends and stock price appreciation, buybacks are another possibility Energy infrastructure companies return capital to shareholders.

In the fourth quarter of 2021, energy infrastructure companies repurchased a total of $650 million of their equity. according to Stacey Morris, CFA, director of research at Aleriana decrease from just over $800 million in buybacks in Q3 21, but more than double the $300 million spent on buybacks in Q2 21.

MLPs accounted for the bulk of buyback activity in 4Q21, led by MPLX (MPLX) $165 million on buybacks, Enterprise Products Partners’ (EPD) $125 millionand Western Midstream (WES) $113 millionwhich had exhausted its prior $250 million buyback authorization, Morris wrote.

Stock buybacks, or repurchases, are an often-overlooked method by which companies share their wealth with investors. A stock buyback, also known as a stock repurchase, occurs when a company buys back its stock from the market. A buyback reduces the number of shares outstanding in the market, which directly increases shareholder ownership.

According to Investopedia, a company may buy back its stock because it believes the market has discounted its stock too much to reinvest in itself or improve its financial metrics. Buyback programs generally show investors that the company is healthy and has excess cash.

In addition to increasing ownership and sentiment, there are tax benefits when companies choose to buy back company stock rather than increasing dividend payments.

The sector is poised to see more buybacks. In December 2021 Enbridge (ENB) announced a $1.5 billion share repurchase plan beginning in early January 2022 and ending in January 2023, Morris said.

In addition, Morris pointed out that in addition to the introduction of an expanded sales framework, WES announced last month a new $1 billion buyback authorization for opportunistic buybacks through the end of 2024.

Investors looking to gain exposure to energy infrastructure should consider this Alerian Energy Infrastructure ETF (ENFR) and the Alerian MLP ETF (AMLP).

For more news, information and strategy, visit energy infrastructure channel.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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