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For investors who are looking for alternative investments outside of stocks and bonds, the answer might be royalty trusts.Royalty trusts could make for safe long-term investments with the added bonus of solid dividends.Royalty Trusts, much like MLPs, generally invest in the energy sector (oil, natural gas, coal, etc.).They generate income from the production of natural resource's oil, gas, etc.

The problem is that the cash flow is dependent on the price of the underlying commodity and production levels and thus could be subject to swings. If the swings are wide, the dividends paid out could vary widely from year to year.

Trusts have no physical operations of their own; they are just financing vehicles that are run by financial institutions such as banks.The resources are mined by other companies, and these companies then pay a royalty on the resources mined to the trust.Investors who are bullish on the long-term prospects of oil might/should consider allocating a portion of their capital to a few of the trusts listed below.Dividend investors might also find these trusts interesting as they all pay out hefty dividends.

Stock

Dividend

Market Cap

Revenue Per share

PE

Total Cash per share

Operating margins

Revenue

Profit Margin

BPT

8.4

2.39B

8.99

12.3

0.05

99.25

192

99.25

PBT

6.6

944M

1.41

14.6

0.14

98.2

66.5M

98.28

SJT

5.9

1.14B

1.43

17.39

0.13

97.72

66.48

98.89

HGT

6.8

869M

1.39

15.8

0.13

98.57

55.68M

98.5

MTR

7.00

81M

3.12

14.3

0.65

97.32

5.82M

97.32

Mesa Royalty Trust (NYSE:MTR)

  • Short ratio: 0.3
  • Percentage held by institutions: N/A
  • ROE: 96.5
  • Qtrly Earnings Growth (yoy): -26.4
  • Total debt: N/A
  • 200 day moving average: $44.47
  • Dividend rate: $3.02
  • Payout ratio: 104
  • Dividend growth rate 5 year average: -2.65
  • Dividend yield 5 year Average: 8.7
  • Consecutive dividend increases1 year
  • Paying dividends since1990
  • Total return last 3 years: -1.9
  • Total return last 5 years: 29.78

Hugoton Royalty Trust (NYSE:HGT)

  • Short ratio: 1.4
  • Percentage held by institutions: N/A
  • ROE: 44.63
  • Qtrly Earnings Growth (yoy): 5.5
  • Total debt: N/A
  • 200 day moving average: $22.20
  • Dividend rate: $1.38
  • Payout ratio: 100
  • Dividend growth rate 5 year average: 13.88
  • Dividend yield 5 year Average: 7.5
  • Consecutive dividend increases: 0 years
  • Paying dividends since 1999
  • Total return last 3 years: 9.97
  • Total return last 5 years: 11.88

San Juan Basin Royalty Trust (NYSE:SJT)

  • Short ratio: 4.3
  • Percentage held by institutions: N/A
  • ROE: 441.38
  • Qtrly Earnings Growth (yoy): -27.5
  • Total debt: N/A
  • 200 day moving average: $23.88
  • Dividend rate: $1.37
  • Payout ratio: 97
  • Dividend growth rate 5 year average: 0.81
  • Dividend yield 5 year Average: 6.6
  • Consecutive dividend increases: 0 years
  • Paying dividends since 1990
  • Total return last 3 years: -12.03
  • Total return last 5 years: -10.89

Permian Basin Royalty Trust (NYSE:PBT)

  • Short ratio: 2.10
  • Percentage held by institutions; N/A
  • ROE: 6,597.32%
  • Qtrly Earnings Growth (yoy): -0.5
  • Total debt: N/A
  • 200 day moving average: $21.08
  • Dividend rate: $1.35
  • Payout ratio: 99
  • Dividend growth rate 5 year average: 13.47
  • Dividend yield 5 year Average: 8.8
  • Consecutive dividend increases: 1 year
  • Paying dividends since 1990
  • Total return last 3 years: 27%
  • Total return last 5 years: 71%

BP Prudhoe Bay Royalty Trust (NYSE:BPT)

  • Short ratio: 7.6%
  • Percentage held by institutions: N/A
  • ROE: 18,949.95%
  • Qtrly Earnings Growth (yoy): 9.3
  • Total debt: N/A
  • 200 day moving average: $109.91
  • Dividend rate: $9.40
  • Payout ratio: 100
  • Dividend growth rate 5 year average: 9.96%
  • Dividend yield 5 year Average: 10.4
  • Consecutive dividend increases: 0 years
  • Paying dividends since 1990
  • Total return last 3 years: 77.91%
  • Total return last 5 years: 111

Conclusion

While investing in royalty trust can yield steady and hefty returns, there is one potential drawback: depletion. These trusts own royalties on a finite amount of resources, and once those resources are gone, the trust is also gone. Most trusts won’t likely hit this point for 1-3 decades, but investors need to understand that the distributions will eventually decline and disappear. It is essential that you do your due diligence before opening any positions in the above-mentioned oil trusts.

Disclaimer: Do not treat this as a buying list. It is very important that you check the finer details in each of the mentioned plays before deploying even one penny into them. What might be good for one investor could be terrible for another investor.

Source: 5 Oil Trusts With Excellent Yields