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Operations in the energy sector can be divided into three distinct subsectors: upstream, midstream, and downstream. 

Profits from two of them—upstream and downstream—vary significantly, with price changes for crude oil, natural gas, and refined fuels. The third sector, midstream, has stable revenue streams and makes a good choice for income-focused investors.

Major energy companies like Exxon Mobil and Chevron operate in all three sectors; however, most energy companies focus on just one.

Profits for upstream producers fluctuate with changes in crude oil and natural gas market prices. Downstream refining companies have an even bigger challenge. The prices of both their input material (crude oil) and their products (gasoline and other fuels) are set by market conditions. Refiners have to be very efficient to stay profitable when prices at both ends go against them.

Midstream revenues and profits are entirely different. These companies own processing plants, pipelines, storage facilities, and terminals. Their customers sign long-term contracts with set pricing schedules. The stability of midstream revenues and free cash flow allows companies to pay attractive, usually growing dividends. Midstream stocks are appealing to investors looking for good yields and increasing income.

Historically, midstream companies were structured as master limited partnerships (MLPs). Over the last decade, most of them have converted to a corporate structure. However, there remain some important MLPs.

Recently, Alerian, which manages the midstream stock indices, released this piece of information:

On a year-over-year basis, more than 80% of the Alerian Midstream Energy Index (AMNA) by weighting have grown their dividends. No AMNA constituent has cut its regular dividend since July 2021.

The AMNA index covers all midstream companies, including corporations and MLPs. The index has an average yield of 4.8%. The AMZ index of MLPs only sports an impressive 6.8% yield.

The InfraCap MLP ETF (AMZA) is my preferred midstream investment vehicle. AMZA pays stable monthly dividends that grow every year. AMZA yields 6.8%, and for 2025, the dividend increased by 11.5%. AMZA is a long term holding in my Dividend Hunter portfolio and cornerstone position in my Monthly Dividend Paycheck Calendar.

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