People love high dividends.
No matter what else is being teased and touted, it seems, the ones that get forwarded to me en masse are the emails touting the high-yielding MLPs, trusts, REITs or plain old dividend-focused stocks that pay out unusually high amounts of cash every month or every quarter … and it’s hard to blame you, our fabulous Gumshoe readers, for this interest — after all, I love a handful of coins in my pocket as much as anyone, and, like many of you, I suspect that I’ll treat cash better than will some of the companies whose stocks I hold. If someone’s going to make a foolish acquisition or buy a silly toy, I’d prefer the private jet to be in my driveway instead of the CEO’s, after all.
OK, so maybe not a jet. Perhaps a new shovel? We end up piling stuff up so high here at Gumshoe HQ that we’re constantly wearing ’em out.
But anyway, you get the point — people love high current yields (even if lower, growing dividends often pay out better over time), and the newsletter guys love selling ’em to you. This one comes from Elliott Gue for his Energy Strategist newsletter, which is is “high end” letter that currently costs around $600/year, and it’s all about the resurgence of US energy trusts.
Energy trusts in the US were a pretty moribund business for a while — there have been several big ones, including the big BP Prudhoe Bay trust that he teases and that offered up high yields for a long time, but while the Canadian Trusts were taking over investor attention ten years ago the US trusts got more or less ignored for a spell. After all, the Canadians had a big advantage: they had the flexibility to buy and sell assets, make investments, or otherwise increase their size … the US trusts were and are more hamstrung and passive, with income tied to usually a single batch of existing oil or gas fields and no corporate ability to buy new fields or invest in the fields.
So that’s a bit of the back story … in recent years, though, with companies eager to monetize their slow-decline fields in order to reinvest without debt, or just to “realize value,” the US producers have started up several more new trusts that have started to catch the attention of yield-hungry investors.
Which one is Gue touting? Well, here’s a bit of his spiel:
“My first pick hides 13,000 feet below Western Oklahoma.
“It’s yielding 13.0% today and set to pay out even more tomorrow.
“On the Osage Plains, the wind carries whispers of a supersized 13% dividend yield—a stunning income bonanza gushing from a bizarre geological formation.
“Better yet: This U.S. royalty trust is so new, many brokers and websites still list its yield as zero—giving you a rare opportunity to scoop up high-yielding units before the investing public catches on.”
Well, the wind isn’t exactly whispering in the Plains today — more of a holler — but we get the point. Brand new yield, on probably some long-standing discoveries in Oklahoma. And something bizarre? Hmmmm… let’s see what else he tells us about our new yielder:
The “bizarre” part is an “underground beach” that he calls the “subterranean riviera”:
“Thanks to a strange geological formation—a massive underground ‘beach’ 160 miles long and 30 miles wide—you’ll be able to count on whale-sized quarterly royalty payments pumping up your cash flow for years to come.”
And he even gives the brief description of oil trusts:
“These trusts allow investors to own a stake and collect royalties from some of the most productive oil and gas fields in the U.S.—Prudhoe Bay being Exhibit A.
“Royalty trusts have unusual qualities different from other investments.
“First and foremost, they aren’t subject to corporate taxes. Yes, you read that correctly. No corporate taxes.
“The trusts pas