Market Overview

Big Commodity Dividends


With interest rates hovering at historical lows and yields on bonds, money markets and CDs at equally as painful levels, income investors are at a quandary; Where to find good distributions, while keeping a level of safety. Investors might find an answer for their portfolios in rising commodity prices.

United States Royalty Trusts, which differ from their Canadian cousins, generate dividend income from the development of natural resources such as coal, natural gas, and crude oil. Designed to be strictly finance vehicles with no production operations, the cash flows generated are subject to the prices of the underlying commodity. Their structure requires them to pay out almost all their royalty income as unit holder distributions. The average dividend yield is in the seven to thirteen percent range. Here a few examples.

While BP (NYSE: BP) is in the dog house, its BP Prudhoe Bay Royalty Trust (NYSE: BPT) is one of the largest oil fields around. The trust currently yields 9 percent.

The Mesabi Trust (NYSE: MSB) is a great way to play the growth in infrastructure. The trust owns interests in various iron ore properties in the Mesabi Iron Range and yields over 14 percent.

The increased usage of natural gas as both a transportation fuel and electricity generator will benefit shareholders in the Permian Basin Royalty Trust (NYSE: PBT). The units currently yield 7.3 percent.

Posted-In: royalty trustsLong Ideas Bonds Dividends Dividends Trading Ideas


Related Articles (BP + BPT)

View Comments and Join the Discussion!

Partner Center