Royalty Trusts are one of the worst ways to supplement Social Security
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Royalty Trusts Are One of the Worst Ways to Supplement Social Security Photo credit: Flickr/PhotoAtelier
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Transcript of Royalty Trusts are one of the worst ways to supplement Social Security
Royalty Trusts Are One of the Worst
Ways to Supplement Social Security
Photo credit: Flickr/PhotoAtelier
For millions of Americans, Social Security doesn’t
provide enough income for retirement.
Retirees therefore must seek ways to supplement
their Social Security.
Some stay in the workforce longer.
Others rely on investment income to bridge the gap.
That investment income needs to come from
secure sources.
The need for income security makes owning a royalty trust one of the
worst ways to supplement Social Security.
Take a look …
BP Prudhoe Bay Royalty Trust
• Last 10 distributions:
NYSE: BPT
Date Amount
4/11/2014 3.01$
1/13/2014 2.53$
10/10/2013 2.17$
7/11/2013 2.14$
4/11/2013 2.41$
1/11/2013 2.32$
10/11/2012 1.82$
7/4/2012 2.31$
4/12/2012 2.65$
1/12/2012 2.52$
Why this trust won’t work:
• The distribution isn’t very consistent from quarter to quarter.
• It is therefore a poor choice for supplementing a fixed-income need.
• Finally, the trust expects to continue making royalty payments only through 2027.
SandRidge Mississippian Trust I
• Last 10 distributions:
NYSE: SDT
Date Target Actual
11/29/2013 0.77$ 0.60$
8/29/2013 0.76$ 0.61$
5/30/2013 0.74$ 0.59$
3/1/2013 0.73$ 0.65$
11/29/2012 0.74$ 0.68$
8/29/2012 0.70$ 0.73$
5/30/2012 0.65$ 0.79$
2/29/2012 0.63$ 0.79$
11/30/2011 0.67$ 0.82$
8/30/2011 1.01$ 1.07$
Why this trust won’t work:
• Distribution has begun to underperform the target over the past few quarters.
• Overall, the distribution isn’t very consistent, making it a poor choice for supplementing a fixed-income need.
• Finally, the trust will dissolve and begin to liquidate on Dec. 31, 2030.
SandRidge Mississippian Trust II
• Last seven distributions:
NYSE: SDR
Date Target Actual
11/29/2013 0.67$ 0.54$
8/29/2013 0.69$ 0.68$
5/30/2013 0.65$ 0.56$
3/1/2013 0.60$ 0.53$
11/29/2012 0.56$ 0.60$
8/29/2012 0.46$ 0.50$
5/30/2012 0.26$ 0.27$
Why this trust won’t work:
• Distribution has begun to underperform the target over the past few quarters.
• Overall, the distribution isn’t very consistent, making it a poor choice for supplementing a fixed-income need.
• Finally, the trust will dissolve and begin to liquidate on Dec. 31, 2031.
3 Big Problems With Trusts
1. They’re subject to commodity price risk.
2. They offer no growth opportunities.
3. Their payments fluctuate and will end at some point in the future.
