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Midstream Stocks Were the Top Gainers in Energy Sector


Jul. 22 2019, Updated 4:03 p.m. ET

Energy stocks

Last week, midstream stock Holly Energy Partners (HEP) outperformed other companies in the energy space. The stock is included in the following ETFs:

  • the Alerian MLP ETF
  • the Energy Select Sector SPDR ETF
  • the VanEck Vectors Oil Services ETF
  • the VanEck Vectors Oil Refiners ETF
  • the SPDR S&P Oil & Gas Exploration & Production ETF

On July 18, HEP declared “a cash distribution of $0.6725 per unit for the second quarter of 2019, compared to the $0.6600 per unit distribution declared for the second quarter of 2018.”

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Midstream stocks were the top gainers in energy

Other midstream stocks TC PipeLines, LP (TCP), and Phillips 66 Partners (PSXP) had the third and fifth-highest rise among energy stocks last week. In fact, the Alerian MLP ETF (AMLP) fell 1.4%, the second-least decline among energy subsector ETFs. The expectation of a rate cut might have limited the downside in midstream stocks. Based on the CME’s FedWatch Tool, there’s a 75.5% probability that the Fed will reduce the interest rates by 25 basis points. Moreover, there’s a 24.5% probability that the Fed might reduce the interest rates by 50 basis points. On July 31, the Fed is slated to announce its stance on interest rates. AMLP’s dividend yield is 7.9%, the highest in the energy subsector. Midstream stocks are popular because of their higher dividend yields. The SPDR S&P 500 ETF’s (SPY) dividend yield is 1.8%. HEP, TCP, and PSXP have dividend yields of 9.2%, 6.6%, and 6.6%, respectively.

Downstream stock Phillips 66 (PSX) rose the second-most among energy stocks last week. On July 19, Cowen and Company increased its target price on Phillips 66 by $6 to $112. On July 18, RBC reduced the target price by $1 to $104. But on July 17, Goldman Sachs increased its target price on PSX by $4 to $108. Moreover, the late expansion in the Brent-WTI spread last week, might also be a game-changer for downstream stocks. US refiners’ output prices are benchmarked to stronger Brent prices. Moreover, the VanEck Vectors Oil Refiners ETF (CRAK) fell just 0.7%, the outperformer among energy subsector ETFs. US downstream stocks account for approximately 32.1% of CRAK.

Upstream stock Occidental Petroleum (OXY) had the fourth-highest rise among energy stocks in the week ended July 19 despite a 7.5% decline in US crude oil prices. On July 18, Carl Ichan formally announced a proxy fight with OXY.


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