Royalty Trusts Are One of the Worst
Ways to Supplement Social Security
Photo credit: Flickr/PhotoAtelier
The need for income security makes owning a royalty trust one of the
worst ways to supplement Social Security.
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.