The Halloween Massacre of 2006 sounds pretty scary, so either I’m a twisted Fool, or there’s a reasonable explanation why it was one of my most enjoyable days as an investor.
The spooky name has been attributed to the 2006 sell-off of shares in Canadian royalty trusts, or Canroys, after the Ministry of Finance announced an end to favorable tax status for the group in 2011. Perplexed by the severity of the market response, given that tax changes would not take effect for five years, I went on a buying spree.
I picked up a basket of oil- and gas-producing Canroys that sported an average dividend yield of about 15%. With energy stocks being all the rage these days, let's circle back to the Canroy realm.
Penn West Energy Trust (NYSE: PWE ) is the largest North American income trust, fed by Canadian oil and natural gas production. After recently completed acquisitions, Penn West boasts total proven pro forma reserves of 560 million barrels of oil equivalent (BOE).
Meanwhile, another sizable player, Provident Energy Trust (NYSE: PVX ) , offers a similar trailing yield (around 12%), a reserve life index of nearly 17 years, and exposure to the attractive natural gas midstream services sector.
Although I am not ditching my Canadian income basket just yet, some U.S. counterparts are beginning to pique my interest. For investors hoping to beat the inevitable exodus out of Canroys as 2011 draws nearer, there are several candidates for a Foolish watch list.
On the surface, BP Prudhoe Bay Royalty Trust (NYSE: BPT ) has some curb appeal with its 11.1% trailing dividend yield. Fools should be aware, however, that production from Prudhoe Bay, America’s largest producing oil field, has been in a consistent slide since the late 1980s.
For more targeted natural gas exposure, consider the XTO Energy (NYSE: XTO ) spinoff Hugoton Royalty Trust (NYSE: HGT ) . With an 80% net profit interest in XTO Energy projects that span three states, including the prolific Anadarko basin, Hugoton should remain an income pipeline for some time to come.
While there’s no need to abandon the Canroys just yet, it’s nice to know that income-loving Fools have some energy trust options south of Niagara Falls.