SBR and the other royalty trusts pay distributions based on oil and gas production from two months earlier. As a result these distributions have not yet fully reflected the sharp drop in oil and gas prices from the highs in August-September. When they do, the yield will drop sharply, as will the unit price. Now is not a good time to buy. Wait until the distributions bottom in two months.
You might consider Oil and Gas MLPs as well. While Royalty trusts do not hedge oil and gas prices, the MLPS are hedged for the next three or four years. If oil and gas prices stay low or go lower, they will likely be able to avoid reducing distributions. Some of the MLPS currently have yields of from 18-25%. On the other hand, if oil and gas prices shoot up again, the yields from the MLPs will have ltttle upside compared to the royalty trusts that will get the full benefit of the higher prices.
I am currently buying MLPS (LINE, EVEP, ENP, LGCY) on dips, but not royalty trusts, until the prices reflects the current low commodity prices and high yield expectation in the stock market.
I am also considering buying. A question for you more knowledgable folks: what about reserve life? Does SBR have a point where it ceases operations when reserves are depleted or does it acquire/explore?
In my mind the only factor I consider is that distributions and share price track with price of oil High yeild when oil is up, lower yeild when oil is down. Another thing I like are the monthly distributions instead of quarterly.
I like the current pricing of the shares - mid 40's to high 30's - and think this is a great place to be buying in. When oil/NGas pricing turn and increase in the future, I believe share prices will raise well beyond current levels.
If you want to trade this stock, it's moves are pretty predictable and will bounce around 4% to 6% pretty easily as oil prices go up and down.
This is mainly a NGas trust, so another plus may be that distribution values may be higher in the winter months if NGas pricing increases to reflect consumer usage... I've not looked closely enough at the correlations.