Even more yield
Sandridge Mississippian Trust I (NYSE:SDT) ), a statutory trust, engages in the acquisition and holding of royalty interests in specified oil and natural gas properties located in the United States. As of March 31, 2012, its properties consisted of royalty interests in the initial wells comprising 36 producing wells and 1 additional well undergoing completion operations; 60 additional wells that were drilled and perforated for completion; and the equivalent of approximately 57 trust development wells to be drilled in the Mississippian formation covering Alfalfa, Garfield, Grant, Major, and Woods counties in Oklahoma. The company was founded in 2010 and is based in Austin, Texas. This trust pays out a current yield of 14.5%.
Royalty Trusts can offer extremely high yields, but are also heavily tied to commodity prices, and in many cases, a specific oil field. These trusts make a good investment if an investor believes that the price of oil will stay high, and an even better play if natural gas prices increase. Investing in these royalty trusts is almost like investing directly in the commodities they are tied to, accompanied by a nice inflation-beating yield.
Royalty trusts with high yields can create a good stream of income for an investor, but as always, it is up to the individual investor to determine if this kind of investment is right for them. Royaltytrusts are not operating bussinesses– they have no employees or management. They purchase rights to royalties and distribute the income tounitholders. This makes them more of a financing vehicle, with payouts that are often tied directly to the energy assets that they hold- which means the payouts can also fluctuate dramatically. Do not touch these trusts if you do not think energy prices are going higher, because with dropping prices your precious yield may also evaporate. Otherwise, enjoy the yield.
All financial data and company profiles obtained from Yahoo Finance
The article Looking for High Yield? 3 Royalty Trusts to Consider for 2013 originally appeared on Fool.com and is written by Joseph Harry.
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