Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Royalty Trusts Are One of the Worst Ways to Supplement Social Security

Photo credit: Flickr/PhotoAtelier 

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. 

How to get even more income during retirement
Or you can skip all that and head strait to our special free report. In the report you'll find details on a simple strategy to take advantage of a little-known IRS rule that can help ensure a more comfortable retirement for you and your family. Click here to get your copy today.


Read/Post Comments (2) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 09, 2014, at 3:55 PM, Prudent1959 wrote:

    Your conclusion is based on variable distributions which is indicative of royalty arrangements. BPT's royalties are based on the performance of WTI oil prices which is trending higher. BPT's distributable life has been extended beyond 2029 and that does not include the additional wells BP Alaska is drilling for the next five years. Your article is short on facts and analysis. BPT's average distribution yield has been over 11% for over 15 years.

  • Report this Comment On June 20, 2014, at 10:10 AM, HavanaRicki wrote:

    Having seen the trans-Alaskan pipeline at Valdez, it would astound me to learn that billions were spent on this project if the north slope field were short-lived. I suspect BP will be pumping there for decades.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2986548, ~/Articles/ArticleHandler.aspx, 8/27/2015 8:38:59 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Matt DiLallo

Matthew is a Senior Energy and Materials Specialist with The Motley Fool. He graduated from the Liberty University with a degree in Biblical Studies and a Masters of Business Administration. You can follow him on Twitter for the latest news and analysis of the energy and materials industries:

Today's Market

updated Moments ago Sponsored by:
DOW 16,654.77 369.26 2.27%
S&P 500 1,987.66 47.15 2.43%
NASD 4,812.71 115.17 2.45%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/27/2015 4:02 PM
BPT $43.14 Up +4.06 +10.39%
BP Prudhoe Bay Roy… CAPS Rating: **
SDR $2.67 Up +0.17 +6.80%
SDT $2.93 Up +0.32 +12.26%
SandRidge Mississi… CAPS Rating: **