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EV Energy Partners LP Message Board

  • dinkdestroyer dinkdestroyer Aug 16, 2009 12:35 PM Flag

    Alternatives to MLPs

    If you want to have something that gives you income and exposure to increased energy prices/inflation protection you might want to investigate Royalty Trusts. Be aware that Royalty Trusts do not hedge, but usual have no debt. They essentially give you income from production of oil, gas or coal from specific properties held in the trust. Without hedges in place to lock in prices the level of income is variable based on the prices of the commodity in a given month. They usually pay monthly not quarterly like MLPs/stocks. The income is not dividend income but royalty income with different tax treatment. When you own these RT's they are the closest you can come to actually owning land with oil/gas production and getting a royalty from the production company that actually drills and produces the oil/gas.
    There are several US Royalty Trusts I like and hold units in, they are(symbols only):


    PBT, MTR, SBR, HGT, NGT

    I am not advising you just buy these outright. I bought these below where they trade now but they are still relatively cheap right here(check out McDep info). I believe Crude Oil could pull back into the low $60 or high $50 range, Natural Gas will be weak for another month or two but then should begin an uptrend.
    More importantly, I believe the stock market is ahead of itself so if it pulls back so will most of these. These can be held in an IRA without the tax issues related to MLPs. Hope this helps you.

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    • Before u jump into Roaltys, check the tax implications carefully. ARAIK, Your Royalty is taxed at the Max. At least that was my experience. I avoid them like the plague.

      • 1 Reply to reading_tee_leaves
      • It is no different than interest in your money market fund. What would you rather have, 6-9 perent in a trust or interest from cash MM at zero. Realize, next year the 15% rate on dividends will go up along with tax rates. MLP income is at the ordinary rate too and both MLPs and R/Ts get some benefits from depletion.
        As I stated in an earlier post, Royalty Trusts give you more upside exposure to the commodity than MLP(tend to hedge) so IF YOU WANT MORE POTENTIAL FOR CAPITAL GAIN they are worth consider.
        Also, some people are looking for something to put in their IRAs because MLPs are problematic. So as usual, it depends on your investment situation and objectives.

    • dareacre@sbcglobal.net dareacre Aug 16, 2009 11:43 PM Flag

      Thanks a lot. I will definitely check that out. I am pretty naive and uneducated about all this investing. I never thought I would be doing this stuff, but am finding it a great new way to spend my time during these hot summer months. Everyone on this board has been very kind and patient. thanks to everyone. Pam

      • 1 Reply to dareacre
      • johnmint@ymail.com johnmint Aug 17, 2009 1:01 AM Flag

        A good resource for research is Valueline, which is available free at most public libraries. It's also available on the web, but you have to pay for it. They cover many stocks, although their coverage of income stocks is a little weak.

        As you probably already know, Google Finance and Yahoo Finance have stock screeners that you can use to identify companies.

        Another oil royalty trust is BPT. There is a closed-end fund with the symbol BDJ which may be interesting. It has a yield of 14%. It invests in dividend paying stocks and enhances the dividends using options. So far, the fund hasn't cut the dividend despite the economy. That's a pretty good sign, but obviously there are no guarantees it can keep the dividend at its current level.

 
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