Debt-Free Dividend Paying Trusts
Mary is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Being debt free is something that the long-term thinking, financially savvy among us strive for. So why not look for that in an investment? Also, most people do not look to investing as a source of income. But that is still no reason to discount a high dividend yield. Dividend reinvestment is a great thing, especially if you are looking to build a long-term portfolio that you can grow old on. Listed here are a few trusts that share these qualities and would make a nice, calm addition to a retirement portfolio.
Great Northern Iron Ore Properties (NYSE: GNI) is at the top of the list. GNI is a trust that owns interest in land spanning two counties in Minnesota. The land is leased to steel and mining companies that mine the mineral lands for taconite iron ore. They operate out of one small office with low overhead, have zero debt, and pay a 20.8% dividend. Minerals are something that will never go out of style. It is not a fad or an experimental trend. And since it is a trust GNI does not have to deal with all the expenses of the actual mining. It is a fundamentally sound company.
Chesapeake Granite Wash Trust (NYSE: CHKR) operates along the same lines as GNI. The trust owns royalty interests in oil, natural gas, and natural gas liquids properties located in Oklahoma. This includes 69 horizontal producing wells and 119 horizontal development wells. The land totals about 29,300 acres. A good deal cheaper than GNI, it posts a dividend yield of 12.3%. Still a good investment value.
Whiting USA Trust I (NYSE: WHX) is a trust that was formed by Whiting Petroleum Corporation (NYSE: WLL). The producing land is primary located in the Rocky Mountain region of the US. Net proceeds payable to the trust depend on several factors, including production quantities and sales prices of oil, natural gas, and natural gas liquids. WHX is a decent price and pays a 16.3% dividend. Although, the only reason this particular trust could be debt free might have to do with some savvy accounting. Still, it is a good value.
ECA Marcellus Trust I (NYSE: ECT) is highly similar to WHX. ECT holds royalty interests in producing and developmental horizontal gas wells for Energy Corporation of America. The royalty interests allow ECT to receive 90% of the proceeds of sales from oil and natural gas attainable through the producing wells, and 50% of sales proceeds from sales attainable through the development wells. And ECT pays a 11.9% dividend.
Cross Timbers Royalty Trust (NYSE: CRT) holds royalty interests in properties in Texas, Oklahoma, and New Mexico. The net profits from these properties are the only assets of the trust, the actual properties being owned by XTO Energy, Inc. The trust was created solely to distribute profits to shareholders. The trust receives between 75 - 90% of proceeds from these properties.
| Trust | MarketCap | Price | Dividend |
| GNI | $108M | $68.98 | 20.8% |
| CHKR | $544M | $23.86 | 12.3% |
| WHX | $256M | $18.41 | 19.9% |
| ECT | $352M | $20.18 | 11.9% |
| CRT | $242M | $40.67 | 7.5% |
*Data in table is accurate as of time of posting.?
GNI and CHKR stand out from the rest, of course, due to the fact that they actually own their land. So with these two trusts there is less chance of turmoil and loss. No matter how far back you go, or how far forward you look, land always has been and always will be worth something. Not that the others aren't a great value either. WHX, ECT, and CRT have a great thing going. They just sit back and let someone else do all the work while they handle the money. Any of these trusts would be a great value for the long-term investor.
Mary Posey has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
