Prudhoe Bay Trust
BP Prudhoe Bay Royalty Trust (NYSE:BPT) is a “depletion trust,” which means it’s essentially just a shell company that cranks out oil, gets paid for it, and passes on the proceeds to investors in the form of dividends. The good news is that the company yields a mammoth 10.7% dividend, and that payout will only go up as crude prices rise and the sales are more lucrative.
The bad news? Well, when the oil is gone, BPT goes to zero.
The trick, then, is to figure out how long to ride BPT. It’s worth noting that in the latest annual report, issued in December 2012, BPT says that “Royalty payments to the Trust are projected to cease after 2029.” So you have plenty of daylight here.
Obviously this is not a set-it-and-forget-it investment. But you can make a pretty nice chunk of change of the Prudhoe Bay income for a few years. Just make sure you get out before the wells run dry or else your dividends will be offset by the race for the exit on shares.
Or heck, if you like income, consider holding forever. The last four distributions tally $8.87. At $80 a share, you can hold the stock for a little more than nine years, then every payout after that is pure profits until the lights go out.
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.