Is NYSEARCA:ENFR the Most Undervalued Midstream ETF in 2025?
With ENFR trading near $23.44 and yielding 5.1%, is this energy ETF the best blend of income, growth, and stability? | That's TradingNEWS
Why NYSEARCA:ENFR Stands Out Amid Energy Market Volatility
How Does ENFR Deliver Yield, Growth, and Stability While Oil Prices Sink?
Broad-Based Midstream Exposure with Real Yield Power
The Alerian Energy Infrastructure ETF (NYSEARCA:ENFR) has quietly become one of the most compelling plays in North American energy infrastructure—not because of speculation or cyclical oil rallies, but because of structural consistency, defensible yields, and smart portfolio construction. Trading at roughly $26.80 per share, ENFR is yielding 5.5% as of March 6, supported by strong cash flow dynamics and a distribution track record that is both reliable and growing. It tracks the Alerian Midstream Energy Select Index (AMEI), a blend of 75% C-corps and 25% MLPs, offering diversified exposure to pipeline, storage, and processing operators across the U.S. and Canada. What separates ENFR from its peers is not just what it holds—but how those components behave in real markets.
The fee-based revenue model of midstream infrastructure firms inside ENFR means they're largely insulated from front-end commodity volatility. Between January 15 and March 5, West Texas Intermediate (WTI) crude fell 17.2%, while the broader Energy Select Sector Index dropped 8.0%. Yet AMEI, the index that underpins ENFR, slipped just 4.6%, and AMZI (its sister index) held almost flat, down just 0.4%. This confirms that midstream names resist oil-linked drawdowns and respond more to volume throughput and contract structure than to spot prices.
Distribution Growth Backed by Free Cash Flow and Corporate Shifts
ENFR’s payout is not just high—it’s climbing. The ETF declared a Q1 2025 distribution of $0.35568, up 3.7% year-over-year. This is not isolated. Major names within ENFR’s basket are hiking payouts in parallel. Plains All American (PAA) raised its dividend 20%, Williams Companies (WMB) lifted by 5.3% to $0.50/share, and ONEOK (OKE) increased to $1.03, a 4.0% gain. Hess Midstream (HESM) moved up 10.5% to $0.7012/share, while Energy Transfer (ET) advanced 3.2% to $0.3250/unit. Enterprise Products Partners (EPD) added another 3.9%, continuing its twice-annual distribution bump trend.
These hikes are made possible by robust EBITDA expansion and free cash flow conversion, both fueled by steady throughput volumes and limited exposure to exploration or commodity cycles. These businesses are shifting from capital-expenditure-heavy adolescence into FCF-generating maturity, where buybacks and dividends are prioritized. That evolution benefits ENFR directly.
Tax Simplicity and Retirement Account Compatibility
One of the core advantages of NYSEARCA:ENFR is its 1099 tax reporting structure, a critical distinction from direct MLP ownership that requires handling Schedule K-1s. K-1s can complicate multi-state tax filings and often disqualify MLPs from being included in IRAs or 401(k)s. ENFR bypasses all of this. Investors receive a single 1099, making it an ideal core holding in tax-advantaged retirement accounts. This efficiency adds practical value beyond the yield and performance metrics.
Expense Advantage and Portfolio Composition
ENFR’s expense ratio is 0.35%, among the lowest in its category. Despite having just $291 million AUM, it competes effectively against much larger ETFs. Its 26 holdings are weighted by market cap, capped and float-adjusted, preventing overconcentration while still leaning toward the sector’s most stable players. Compared to AMLP (10.3B AUM, 0.85% expense), MLPX (2.72B, 0.45%), and EMLP (3.16B, 0.95%), ENFR’s cost-efficiency and construction make it an attractive pick for cost-conscious allocators.
Total Return and Long-Term CAGR Validate ENFR's Edge
ENFR delivered a 26.90% total return over the past year, outperforming both AMLP (7.03%) and MLPA (7.26%). Only MLPX slightly edged it at 27.92%, though it carries higher risk, as reflected in its C+ risk grade compared to ENFR’s B-. On a five-year basis, ENFR generated 73.78% price performance, trailing only MLPX at 94.58%, but ahead of EMLP at 46.02%, AMLP at 52.74%, and MLPA at 44.10%. Dividend growth for ENFR sits at 2.29% CAGR over five years, behind EMLP’s 10.26%, but superior to MLPA’s and AMLP’s negative growth.
This balance—high yield, low cost, strong total return, and moderate risk—makes ENFR especially compelling. For investors seeking high-quality, inflation-resistant income exposure with minimal tax and structural drag, ENFR currently sits in a sweet spot.
Structural Shifts and Risk Management in Midstream Holdings
MLPs continue transitioning to C-corp formats, driven by institutional demand and lower capital intensity. This dynamic benefits ENFR’s composition, which captures both legacy MLP names and their new corporate reincarnations. However, risks remain. Contracts in ENFR’s holdings are long-term and volume-linked, but can be renegotiated or challenged in downturns. Some components still maintain higher leverage profiles or face geopolitical and regulatory hurdles tied to pipeline development and environmental scrutiny.
Additionally, ENFR’s modest AUM means liquidity risk exists. Bid-ask spreads can widen during volatility, and institutional buying or redemptions could cause outsized price action. Income investors using options strategies like covered calls may find the wide spreads challenging.
A Cost-Efficient Hedge Against Oil Volatility
Crude oil fell over 17% from January to early March, but ENFR’s core exposure proved resilient. That's not accidental. The AMEI index, which ENFR tracks, focuses on revenue from pipeline transport, storage, and processing—not upstream extraction. As such, the ETF acts as a defensive posture within the energy sector, maintaining income and price stability even during commodity pullbacks. That stability has helped ENFR increase its payout even while oil markets retraced, including a 5.2% yield from its underlying index as of February 11.
Why NYSEARCA:ENFR Still Looks Undervalued
The ETF’s forward yield near 5.5%, one-year return of 26.90%, and expense ratio of just 0.35% all point to a product that is delivering alpha in excess of its cost. It is currently trading below its sector average valuation when measured by price-to-cash-flow of the underlying holdings, with a better Sharpe profile than higher-yielding alternatives like AMLP. While AMLP and MLPA deliver 7%+ yields, their D+ risk grades and anemic total returns weaken the income story.
ENFR also benefits from improved dividend growth visibility. In addition to first-quarter distribution growth of 3.7%, many of the ETF’s top names are guiding for additional hikes in 2025. Targa Resources (TRGP), for instance, is preparing for a 33% dividend increase, while others like ET, EPD, and HESM continue raising payouts sequentially. With a portfolio full of companies returning capital to shareholders and managing costs more conservatively than in previous boom cycles, ENFR stands to continue growing its distribution.
Final Assessment of NYSEARCA:ENFR’s Investment Profile
At its current price level near $26.80, ENFR presents a deeply attractive blend of income and capital preservation. For those seeking exposure to the energy infrastructure sector without the K-1 complexity or commodity risk of direct MLP holdings, ENFR solves for both. Its performance has proven it can outperform peers while offering risk-adjusted returns through yield, consistent distributions, and pricing discipline. With an expense ratio of 0.35%, a 5.5% yield, rising payouts, and a structurally defensive business model across its components, ENFR remains a high-conviction Buy.
