They're arguably the most successful high-yield stocks to ever
. I'd venture more fortunes have been made with these securities
than just about any other income investment out there.
And thanks to the market's recent drop, I think they present a
great opportunity for income investors right now. In fact, the last
time I saw this sort of opportunity, I was up 80% on my investment
in just six months. But before I get too far, I want to show you
what some of these stocks can do over the long term...
Few investors have heard of
BP Prudhoe Bay Trust (NYSE:
. It first went public back in 1989. Over the years, it's returned
more than 6,400% -- including $103 per share in dividends.
But this wasn't some stock that you had to get in on early in
its history to hit it big. In fact, if you put just $1,000 into the
BPT back in 2002 -- 13 years after it first went public -- you'd
have a total investment worth nearly $30,000 today... not to
mention earning dividends worth more than $73 a share.
And this isn't some "one-off" opportunity that you had to be
lucky to find. I've found trusts that have returned 200%, 215%, and
820% in the past decade, on the back of rising oil
Put simply, royalty trusts like BPT own a stake in dozens -- if not
hundreds -- of oil and natural gas wells. By owning the units
(technically, they're not stocks, but trade the exact same), you
get the cash from your stake in this production in the form of
distributions. It's like owning your own oil derrick, and royalty
trusts pay an average
of 8.3%, with several paying double-digit yields.
You'd expect that opportunities to pick up royalty trusts at
good prices would be next to impossible. After all, who doesn't
want a stake in an oil field... especially when that stake throws
off a yield of 10% or more?
But that's not the case right now. And I think investors could
make a lot of money.
Since the start of the sell-off, the S&P has shed 7%...
while oil has had it even worse, falling more than 13% from its
This drop has affected some securities more than
Because they are tied to oil and natural gas prices, you'd
expect these trusts to fall some. But take a look at what's
From their high,shares of BP Prudhoe Bay Trust are down
13% -- about the same as oil prices. But
SandRidge Permian Trust (NYSE:
are down 18% from their highs.
SandRidge Mississippian Trust (NYSE:
is down 19%. And
Cross Timbers Royalty Trust (NYSE:
is down 22%. This is despite their high yields.
I think this disconnect is a great opportunity. But there's
more. In addition to oil, many royalty trusts produce a lot of
natural gas -- which is up 26% since late April.
Meanwhile, these trusts continue to pump out distributions, the
size of which are found in few other places.
Let me be clear. There's noguarantee that you'll make money from
this disconnect. But history is certainly on your side.
After the market dropped in October of last year, I saw an
opportunity and added shares of SandRidge Mississippian Trust to my
"real-money" portfolio for my premium
Top 10 Stocks
advisory after panicked investors dumped the shares.
Within months, my subscribers and I we were up over
Risks to Consider:
Don't get me wrong. Royalty trusts aren't risk-free (nothing
short of a
is). And as you've seen, they can be volatile as short-sighted
investors sell in a panic.
Action to Take -->
But when opportunities like this appear, they usually don't last
long... so if you plan to take advantage, then I'd do it soon.
-- Paul Tracy
P.S. -- For more opportunities that I've found, don't miss my
latest presentation -- "Top 10 Stocks for June 2012." One stock has
raised its dividend 463% since 2004... another holds $9.00 per
share in cash (54% of its share price)... another yields 8.0%.
Visit this link to learn more about my "Top 10 Stocks for June
Paul Tracy does not personally hold positions in any securities
mentioned in this article. StreetAuthority LLC owns shares of SDT,
PER in one or more if its "real money" portfolios.
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