Portfolio of Canadian Oil and Gas Royalty Trusts
If you are looking for high income, consider a Canadian royalty trust that sells oil and gas from its proven and probable reserves. The trust pays shareholders a large percentage of its free cash in the form of cash distributions (dividends). Typically, the yield is in excess of five percent.
One downside of a royalty trust is that eventually it will run out of oil and gas so before you buy one, check the reserve life of the trust's holdings. Look for a reserve life of at least ten years and the longer the better. Of course a trust can purchase new reserves but there is no guarantee of their life span.
A trust pays its distributions from free cash flow (net income plus depreciation minus capital spending). Compute the ratio of the distribution with the cash flow. A small percentage means the distribution can be maintained or increased. Beware of a large percentage of 90 percent or more.
The day-to-day price of a trust usually tracks the price of oil and natural gas. When oil and gas prices fall, the share prices of most trusts will fall. Unlike a bond that pays you full face value when it matures, the future price of a royalty trust is not guaranteed.
IMPORTANT NOTE: Before investing in these trusts, check with your
tax advisor about the tax treatment of the cash distributions.
Here are 4 well-known trusts.
| Canadian Oil and Gas Royalty Trusts | |||||||
Stock | Quote | Dividend & Dividend Yield | Interactive Price Chart | ||||
| Baytex Energy Trust | 2.59 (6.70%) |
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| Enerplus Resources Fund | 1.07 (6.80%) |
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| Pengrowth Energy | 0.47 (9.20%) |
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| Penn West Energy Trust | 1.06 (11.20%) |
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To follow the day-to-day progress of the Canadian Oil and Gas Royalty Trusts portfolio, check out the returns table and chart below. Dollar values are computed using weekly closes for stocks from Yahoo! Finance. All 4 stocks are included in the chart computations. The current value of the portfolio assumes that $2,500.00 was invested (total of $10,000) in each stock at its closing weekly price for the first week of January 2007.
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Canadian Oil and Gas Royalty Trusts - Return Results | |
| Portfolio: | Canadian Oil and Gas Royalty Trusts |
| Start date: | Jan-03-2007 |
| Start value: | $10,000 |
| End date: | May-23-2013 |
| End value: | $14,299 |
| Number prices | 334 |
| Minimum value occurred on Mar-02-2009 | $4,630 |
| Maximum value occurred on Apr-04-2011 | $24,113 |
| Total gain or loss (Start date to End date) | 42.99% |
| Annualized gain or loss (Start date to End date) | 5.73% |
| Sharpe Ratio | 0.47 |
| Total dollar value on End date of a $10,000 purchase made on Start date | $14,299 |
| Average percent return for all possible buy/sell combinations | 35.67% |
| Number returns | 55,611 |
| Number profitable returns (Winners) | 39,749 |
| Percent profitable returns | 71.48% |
| Number unprofitable returns (Losers) | 15,862 |
| Percent unprofitable returns | 28.52% |
| Winners to losers ratio | 2.51 |
Click chart to enlarge it. |
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