Summary

• The ETNs that track the Alerian MLP Index.
• The 50 MLPs in the index.
• Slight differences give the edge to the UBS Etracs product.

If there’s one thing any viewer of Jim Cramer’s show, Mad Money on CNBC, will come away with, is the importance of diversifying your portfolio. In fact diversifying is what he calls his single most important investing rule . As dividend investors, the tendency is to prey heavily in one area to get the very best stocks in our portfolios. Whether it’s BDCs, REITs, Energy MLPs, Dividend Champions or Utilities, our portfolios tend to lean in one direction in the pursuit of our goals. If energy-related MLPs is one of your portfolio’s tenets, is there a way to utilize an exchange traded product to attain this goal? This article will look at the two ETNs that track the Alerian MLP Index (AMZ). The two choices: the JPMorgan Alerian MLP Index ETN (NYSEARCA:AMJ ) and the UBS Etracs Alerian MLP Index ETN (NYSEARCA:AMU ).

I will state right upfront that I am not generally a huge fan of ETN products, but, given the recent tax revelations with the AMLP ETF (see Ron Rowland’s SA article here). the exposure to MLPs through this instrument gives the best parts (the yield and diversification) for a fraction of the cost. Note: AMLP tracks another Alerian MLP Index, the Alerian MLP Infrastructure Index (AMZI) which is actually a subset of the AMZ index under discussion in this article.

The Index

The Alerian MLP Index (ticker AMZ), is comprised of fifty Master Limited Partnerships engaged in the transportation, storage, processing or production of energy commodities. Many of the MLPs in this index are the mainstays of article activity on the Seeking Alpha website. Names such as Linn Energy (NASDAQ:LINE ), Kinder Morgan Energy Partners (NYSE:KMP ), BreitBurn Energy Partners (NASDAQ:BBEP ), Vanguard Natural Resources (NASDAQ:VNR ), Seadrill Partners (NYSE:SDLP ), and Enterprise Products Partners (NYSE:EPD ) comprise almost 30% of this index.

The index rebalances quarterly (market cap weighted, float adjusted) with the most recent adjustment performed on September 19th. The criteria to make the list does not dive down into traditional fundamentals that would indicate the health or well-being of a company other than the maintaining or increasing its distributions. The list of MLPs and weightings from the latest rebalance are listed in the table below (sources: Alerian, Yahoo, Author’s calculations)