| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 8.3% | 1.9% | 6.0% |
Miller/Howard's midstream energy strategy focuses on a sector experiencing fundamental transformation driven by new demand sources. The portfolio benefits from three key tailwinds: natural gas exports, data center growth, and electrification trends, which are expected to drive an additional 20-25 Bcf/d of incremental natural gas demand through 2030. The midstream industry demonstrates healthy fundamentals with declining leverage, stronger balance sheets, and shareholders being rewarded through higher dividends and share buybacks. Six of sixteen holdings announced dividend increases this quarter, averaging 7.5% year-over-year growth. While the sector faces near-term challenges including NGL asset overbuilding on the Gulf Coast and potential geopolitical supply disruptions, the manager views these as temporary headwinds. The data center tailwind represents a particularly compelling long-term catalyst, though its full impact on cash flows won't materialize until 2027. Despite several years of strong performance, valuations remain attractive, positioning the portfolio for continued income growth and total returns as demand fundamentals strengthen.
The midstream energy sector is positioned for growth driven by increasing natural gas demand from data centers, exports, and electrification, with healthy industry fundamentals supporting rising dividends and share buybacks despite some near-term headwinds.
The manager expects midstream cash flows to increase as a result of growing natural gas demand, with investors potentially benefiting from rising dividends or share buybacks. While valuations are not rock-bottom, multiples remain attractive even following several years of healthy midstream stock performance.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 24 2026 | 2025 Q4 | AM, EPD, ET, GEL, LNG, PAA, SUN, WES, WMB | Data centers, dividends, energy, LNG, Midstream, MLPs, Natural Gas, Pipelines | - | The midstream energy industry is healthy with declining leverage, stronger balance sheets, and shareholders being rewarded through higher dividends and share buybacks. New tailwinds have developed including natural gas exports, data centers, and electrification trends driving demand growth. Data centers represent a significant tailwind for natural gas demand, with the US expected to see an additional 20-25 Bcf/d of incremental natural gas demand through 2030. However, this tailwind will not fully impact midstream cash flows until 2027. Distribution increases were prominent with 6 of 16 holdings announcing dividend increases this quarter, averaging 7.5% year-over-year growth. Rising dividends are expected as midstream cash flows increase from growing demand. Natural gas exports represent a key growth driver for the midstream sector. However, concerns about LNG supply/demand fundamentals weighed on some stocks, and potential Russian gas returning to Europe could negatively impact US natural gas exports. |
| Oct 19 2025 | 2025 Q3 | - | Capex, dividends, energy, Midstream, Natural Gas | - | Midstream energy companies saw strong cash flow outlooks as AI-driven data centers and exports increased natural gas demand. Although near-term capex pressures cash flow, higher distribution growth is expected as projects come online. The fund favors fee-based operations and disciplined capital allocation within the MLP sector. |
| Jul 22 2025 | 2025 Q2 | - | dividends, energy, free cash flow, Midstream, Natural Gas | - | The letter focuses on midstream energy as a misunderstood income-generating sector supported by strong balance sheets, free cash flow, and structural demand from natural gas exports and data centers. Management argues current volatility reflects macro noise rather than deteriorating fundamentals. The outlook favors disciplined capital allocation, dividend growth, and buybacks as catalysts for rerating. |
| Mar 31 2025 | 2025 Q1 | - | - | - | |
| Dec 31 2024 | 2024 Q4 | - | - | - | |
| Sep 30 2024 | 2024 Q3 | HESM, LNG | - | - | |
| Jun 30 2024 | 2024 Q2 | MPLX, OKE, PAGP | - | - | |
| Mar 31 2024 | 2024 Q1 | HESM, TRGP | - | - | |
| Dec 31 2024 | 2023 Q4 | TRGP | - | - | |
| Sep 30 2024 | 2023 Q3 | MMP, NS, SUN | - | - | |
| Jun 30 2024 | 2023 Q2 | AM, EPD, SUN | - | - | |
| Mar 30 2024 | 2023 Q1 | MPLX | - | - | |
| Feb 22 2023 | 2022 Q4 | - | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
Data CentersSupply constraints curtailing infrastructure buildout rate, but compute capacity is being used immediately upon coming online. This differs from dot-com bubble when dark fiber was installed ahead of need. Labor, power and land shortages creating bottlenecks. |
Supply Constraints Utilization Bottlenecks Infrastructure |
DividendsJapanese companies paid record dividends of ¥18 trillion for fiscal year ending March 2025, a 13.8% year-over-year increase. Many major firms have adopted progressive dividend policies guaranteeing dividends will never be cut, only maintained or increased. |
Progressive Dividend Record Payouts Shareholder Returns Yield Growth | |
LNGNatural gas exports represent a key growth driver for the midstream sector. However, concerns about LNG supply/demand fundamentals weighed on some stocks, and potential Russian gas returning to Europe could negatively impact US natural gas exports. |
Exports Natural Gas Global Supply Demand | |
MidstreamThe midstream energy industry is healthy with declining leverage, stronger balance sheets, and shareholders being rewarded through higher dividends and share buybacks. New tailwinds have developed including natural gas exports, data centers, and electrification trends driving demand growth. |
Pipelines Natural Gas LNG Cash Flow Infrastructure | |
| 2025 Q3 |
EnergyBHE operates regulated utilities serving 5.4 million customers and natural gas pipelines. The business faces significant investment needs driven by AI computing demand and wildfire risk mitigation, particularly in the Western U.S. |
Regulated Utilities Natural Gas Renewable Energy Grid Infrastructure |
MidstreamThe midstream energy industry is healthy with declining leverage, stronger balance sheets, and shareholders being rewarded through higher dividends and share buybacks. New tailwinds have developed including natural gas exports, data centers, and electrification trends driving demand growth. |
Pipelines Natural Gas LNG Cash Flow Infrastructure | |
Natural GasNorth American gas showed strength on cold weather despite bearish sentiment. Production growth concentrated in Permian Basin while other shales declined. Supply growth expected to plateau as Permian oil production slows, setting stage for higher prices as LNG demand expands. |
Shale Permian LNG Weather | |
| 2025 Q2 |
EnergyBHE operates regulated utilities serving 5.4 million customers and natural gas pipelines. The business faces significant investment needs driven by AI computing demand and wildfire risk mitigation, particularly in the Western U.S. |
Regulated Utilities Natural Gas Renewable Energy Grid Infrastructure |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| No Elevator Pitches found | ||||||||||
| TICKER | COMMENTARY |
|---|---|
| AM | The quarter saw a rotation away from natural-gas-focused stocks. |
| EPD | There should be a free cash flow (FCF) inflection in 2026. EPD increased its buyback authorization to $5 billion from $2 billion. |
| ET | ET now expects to be slightly below the low end of its 2025 EBITDA guidance range. The quarter saw a rotation away from natural-gas-focused stocks. |
| GEL | GEL now expects 2025 EBITDA to be slightly below the low end of its prior guidance. |
| LNG | Concerns about liquefied natural gas (LNG) supply/demand fundamentals weighed on the stock, although the company is highly contracted, which limits exposure to commodity prices and other risks. |
| PAA | The stock benefitted from a rotation to crude-focused companies and away from natural-gas-focused companies. |
| SUN | The stock benefitted from a rotation to crude-focused companies and away from natural-gas-focused companies. |
| WES | Raised guidance; a completed acquisition allows WES to become a bigger water player in the Permian Basin. |
| WMB | The quarter saw a rotation away from natural-gas-focused stocks. WMB continued to sign deals to provide natural gas to data centers. |
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