Research > ETFs > ETF / ETP Commentary > 

Seeking Tax-Deferred Income? Look to the AMLP ETF

In office barely more than three months, President Biden is busying pitching various plans and proposals, including the largest tax increase the U.S. has seen in three decades.In fairness, the increase, which includes significant alterations to the capital gains structure, is targeted at big earners and high net worth individuals and married couples. It remains to be seen if it passes and in what form, but mere speculation that taxes could rise has some investors looking for tax-deferred income.Master limited partnerships (MLPs) and the ALPS Alerian MLP ETF (AMLP A) are assets that can help in that quest.“For tax-deferred income, Master Limited Partnerships (MLPs) may represent an attractive option for investors,” writes Alerian analyst Stacey Morris. “Typically 70-100% of MLP dividends (called distributions) are considered to be a tax-deferred return of capital, which means the taxes on that portion of the income are not paid until the investment is sold. The portion of the distribution that is not a tax-deferred return of capital is taxed at ordinary income rates in the current year.”Big Yield, Tax Benefits with 'AMLP'AMLP, the largest exchange traded fund tracking MLPs, sports a dividend yield of 10% and is up a stout 29% year-to-date, confirming its leverage to the rally in energy stocks.The ETF seeks investment results that correspond generally to the price and yield performance of its underlying index, the Alerian MLP Infrastructure Index. The index is comprised of energy infrastructure MLPs that earn a majority of their cash flow from the transportation, storage, and processing of energy commodities.“As pass-through entities, MLPs do not pay taxes at the company level, and an increase in the corporate tax rate would widen MLPs’ tax advantage relative to corporations,” adds Morris.Bottom line: there’s plenty of politicking remaining on the tax front, but with energy stocks soaring and MLPs offering plenty of income, tax-deferred or not, AMLP could be an appealing strategy for investors regardless of what happens on Capitol Hill.For more on cornerstone strategies, visit our ETF Building Blocks Channel.

Performance data shown is past performance and is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. Yield and return will vary, therefore you have a gain or loss when you sell your shares. For standard quarterly performance, go to the fund's Snapshot page by clicking on the ETF/ETP's symbol.

ETFs may trade at a premium or discount to their NAV and are subject to the market fluctuations of their underlying investments.

For iShares ETFs, Fidelity receives compensation from the ETF sponsor and/or its affiliates in connection with an exclusive long-term marketing program that includes promotion of iShares ETFs and inclusion of iShares funds in certain FBS platforms and investment programs. Please note, this security will not be marginable for 30 days from the settlement date, at which time it will automatically become eligible for margin collateral. Additional information about the sources, amounts, and terms of compensation can be found in the ETF's prospectus and related documents. Fidelity may add or waive commissions on ETFs without prior notice. BlackRock and iShares are registered trademarks of BlackRock, Inc. and its affiliates.

FBS receives compensation from the fund's advisor or its affiliates in connection with a marketing program that includes the promotion of this security and other ETFs to customers ("Marketing Program"). The Marketing Program creates incentives for FBS to encourage the purchase of certain ETFs. Additional information about the sources, amounts, and terms of compensation is in the ETF's prospectus and related documents. Please note that this security will not be marginable for 30 days from the settlement date, at which time it will automatically become eligible for margin collateral.

News, commentary (including "Related Symbols") and events are from third-party sources unaffiliated with Fidelity. Fidelity does not endorse or adopt their content. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use.

Any data, charts and other information provided on this page are intended to help self-directed investors evaluate exchange traded products (ETPs), including, but limited to exchange traded funds (ETFs) and exchange traded notes (ETNs). Criteria and inputs entered, including the choice to make ETP comparisons, are at the sole discretion of the user and are solely for the convenience of the user. Analyst opinions, ratings and reports are provided by third-parties unaffiliated with Fidelity. All information supplied or obtained from this page is for informational purposes only and should not be considered investment advice or guidance, an offer of or a solicitation of an offer to buy or sell a particular security, or a recommendation or endorsement by Fidelity of any security or investment strategy. Fidelity does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating ETPs. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use. Determine which securities are right for you based on your investment objectives, risk tolerance, financial situation and other individual factors and re-evaluate them on a periodic basis.

Before investing in any exchange traded product, you should consider its investment objective, risks, charges and expenses. Contact Fidelity for a prospectus, offering circular or, if available, a summary prospectus containing this information. Read it carefully.