Three Top Canadian Royalty Trusts

With the price of oil dropping below $40 a barrel for several days, the prices of the Canadian oil royalty trusts have dropped substantially. These Canadian Income Trusts, also known as Canadian Oil Income Trusts or Canadian Royalty Trusts pay a very high income.

These trusts pass through all their earnings from oil and gas wells to the trust holders, similar to real estate investment trusts. There is no taxation at the corporate level since they are structured as trusts. Also, a portion of the dividends may be non-taxable due to depletion and depreciation deductions.

You should be aware that the Canadian government came out with a plan to tax all Canadian trusts at the corporate level beginning in the year 2011. However, the average yield from Canadian trusts is still higher than the U.S. royalty trusts. WallStreetNewsNetwork.com recently came out with an updated database list of Canadian Oil Royalty Trusts. Below is a list of some of the Canadian Royalty Trusts that are traded on United States stock exchanges.

Pengrowth Energy (PGH) has been paying dividends since July 2004. The stock has a P/E of 9, with a yield of 28.1%.

Provident Energy Trust (PVX) has been paying monthly dividends since October 2002, has a P/E of 5 and pays a yield of 22.6%.

Advantage Energy Income (AAV) has paid dividends since April 2004. The stock has a P/E of 8 and a yield of 28.7%.

To get an Excel database list of all the US-traded Canadian Income Trusts, which you can download and sort, go to WallStreetNewsNetwork.com.

Please note: these very high yields may not be sustainable.

Disclosure: Author does not own any of the above.

Comments

[Briggsy:]

PGH just cut its dividend, reflecting the reduction in royalties from declining oil prices.

2008 Dec 30 01:14 PM

[NOWHEREMAN:]

A couple of others, HTE and PWE. PWE is one I love to hate, management not the assets.

They will all be declaring Distributions by the mid of Jan., will be interesting to say the least.

2008 Dec 30 04:10 PM

[silverwood:]

All three of these stocks recently cut their dividend, which hurt the income needing investor but was a good move to strenghten operations. Some other NYSE traded Canroys are PWE, HTE, BTE, and ERF. These were a sweet deal until politicians stuck their noses in their business. I am invested in all of the above. I do believe they have been oversold, probably because they were prime candidates for the Yen carry trade. OIl will correct sometime in the not too distant future and when that happen these companies will rebound strongly.

2008 Dec 30 04:18 PM

[Greg Pinelli:]

This article is so far behind the curve it's almost hitting itself in the butt coming back....the Canadian Trusts are still decent safe haven plays..but for those wanting to move somewhere near the front of the curve look at LGCY and (especially) LINE.

2008 Dec 30 08:00 PM

[axelrod608:]

Love those Canroys, also the energy related American MLP's. Yes, they've been hit hard, but if one buys them at current prices, the yields and gains should be extraordinary when(ever) oil prices go back up.

Almost all have cut dividends, but where else can you get double digit yields AND a hefty upside potential ? I bought HTE at $7.00 a share when the dividend yield was almost 40%( before currency exchange).

2008 Dec 30 09:18 PM

[oilsands:]

Yes, the world economy is slowing down, but I believe most Americans are
overlooking the real strength of the India-China combination.

No one in this string bothered to mention the tax pools which some of the royalty trusts are building, which will shelter them from the effects of the new tax for years to come.

2008 Dec 31 12:12 PM

[macsmart:]

HTE and PWE are big enough and strong enough to maintain their dividends for some time. HTE also has a refinery. Since the price of oil is down, refinery costs are down, providing protection for the investor.

I own numerous Canroys. I believe they will come back, but I sold my PVX. It has done nothing but drop even when oil prices were still high. Instead, I've bought MLP's. ETP, EPD, PVR and NSH. NS and NSH both are infrastructure plays...production of asphalt. They are going to need a lot of asphalt for those roads Obama is going to build.

2008 Dec 31 12:23 PM

[svosavvy:]

Not to be a downer, but, pwe in their last quarterly guaranteed their distribution level through to the jan payout. Well, we're here I wouldn't be surprised to see a cut out of them next month. I am still long pwe (and pvx). One of my main reasons for liking the canroy's is the fact they must payout 90% of their takings which leads to very high yields which lend a margin of safety. Honestly in today's environment if I can get a 5+% yield out of something then I'm pretty happy. I bought some pwe at $27 a while back, but, at the current distribution I'm still at 15% and if they cut it in half it's like a +or- 7% still not too shabby. I guess my point is they are not allowed to not pay a dividend unless they make no money. Try and find another class that must pay you something, heck I know people who piled into fcx for the dividend and then they cut it altogether, now they must wait for share appreciation to be their payout, good luck. This is a nongrowth environment so imho you have to look for something that will pay you a stagnation tax (that's code for dividend).

2008 Dec 31 10:37 PM

[GE Smith:]

.... and if you're looking for a broad well managed basket of Canadian trusts/REITS, there's Sentry Select's Diversified Trust (SDT.UN on TSX)

Jan 04 04:55 PM

[Conan the B...:]

Didn't take very long, PWE's distribution level is now .23 Canadian.

But then they really do not have anything other than oil going for them.

PVX maintained it level at .09.

Jan 15 02:46 AM

[JQUERIDO:]

Please put reference to these tax pools, particularly in regard to PVX
Thank you


On Dec 31 12:12 PM oilsands wrote:

> Yes, the world economy is slowing down, but I believe most Americans
> are
> overlooking the real strength of the India-China combination. <br/>
>
> No one in this string bothered to mention the tax pools which some
> of the royalty trusts are building, which will shelter them from
> the effects of the new tax for years to come.

Jan 21 02:25 PM

[TampaGambler:]

PVX .09 dividend is in Canadian Dollars. US dividend is more like .07. Also, looking at analyst estimates (admitedly only one analyst covering) the company's EPS projection is way way down. Hard to believe they'll be able to continue this level of dividend unless oil/ng prices come back up very strong.

Jan 23 07:51 PM

[Ames Tiedeman:]

I expect PGH to cut their dividend in March. HTE will follow.

Feb 07 01:29 PM