Few investments throw off income as generous as royalty trusts. BP Prudhoe Bay Royalty Trust (NYSE:BPT), for example, currently yields 12.75%. Even that's small potatoes when compared with SandRidge Mississippian Trust I (NYSE:SDT), which yields 27.5%, or SandRidge Mississippian Trust II (NYSE:SDR), which yields 29.28%.
Yet as high as these payouts are now, these are among the worst investments to make to supplement Social Security, for the simple reason that there is no security when investing in a royalty trust. The payouts of all three trusts can fluctuate from quarter to quarter or could offer no growth at all, and all three will cease to exist at some point in the future.
I created the following slideshow to help investors better understand why royalty trusts are such a bad idea to use in supplementing Social Security. The presentation shows just how much the income from these trusts can fluctuate, as well as the likely expiration date of the payouts. The presentation also contains a link to a special free report that details a much better way to supplement Social Security.
Matt DiLallo and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.