BP Prudhoe Bay Royalty Trust
U.S. royalty trusts — which are different from their former Canadian cousins — generate dividend income from the development of natural resources such as coal, natural gas, and crude oil. These cash flows are subject to the prices of the underlying commodity. If oil is at all-time highs, the dividends will reflect that.
The trust — which is operated by British Petroleum (BP) — covers royalties from approximately 150,000 acres of the total 213,500 acres in the Alaskan field. Prudhoe Bay has been churning out steady production since the late 1970s and is one of America’s largest oil fields. That has made PBT a pretty steady dividend payer over the years.
However, keep in mind that royalty trusts do have a finite end date. PBT’s wells are expected to run dry around 2029. At that time, the trust will cease to exist — assuming that advanced drilling techniques can’t pull any extra production from the wells.
Regardless, investors should still have at least 10 years of high dividends to reap.
As of this writing, Aaron Levitt was long CLMT.