The midstream space has historically been known for attractive dividends/distributions with yields exceeding those of other income-oriented investments. While the income remains generous, the midstream business model has been tilting toward a greater total-return focus for some time (see this piece from June 2019). Even prior to the impact of COVID-19 on energy markets, companies were emphasizing more sustainable dividend growth, capital discipline, balance sheet improvements, and free cash flow generation. Admittedly, despite the focus on total return, the space has not been able to deliver with equity prices battered by macro headwinds and persistent selling pressure. However, midstream’s substantial income could be complemented by capital appreciation going forward as improvements pay off and free cash flow gains traction. Increasing free cash flow generation means investors could potentially benefit from shareholder-friendly returns such as buybacks when the macro environment stabilizes. Today’s note discusses midstream’s ongoing shift to a total-return focus

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