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sirrom
Heavy Crude
Joined: Feb 08, 2007
Posts: 197
Location: England
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 Posted: Sat Oct 13, 2007 11:35 am Post subject: Oil royalty trusts? |
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is it worth investing in them?
i heard you can sometimes get dividends of 10%.
do you know of any that can be bought on the london stock exchange?
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zberry
Heavy Crude
Joined: Mar 21, 2006
Posts: 135
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| Posted: Sat Oct 13, 2007 9:39 pm Post subject: Re: Oil royalty trusts? |
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| Quote: | | i heard you can sometimes get dividends of 10% |
You heard wrong. You can sometimes get dividends of 15, or16 %.
Here's the deal with the trusts. In 2011, the plan is that new taxes will kick in, which will decrease the amount of money available to distribute to shareholders.
There is really only one question you have to ask yourself: Do you think oil is going to be higher or lower in 2011 than it is today?
Go to europac.net and go to resources > weekly radio show > archives. Peter Schiff talks about them extensively and does a much better job of explaining the pros and cons than I or anyone else on this board can probably do. |
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mattduke
Light Sweet Crude
Joined: Oct 28, 2005
Posts: 1362
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| Posted: Sat Oct 13, 2007 9:46 pm Post subject: Re: Oil royalty trusts? |
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| The oil majors have performed well, but I'm in the process of transitioning away from them towards the more niche producers because, after all, it's getting harder to find oil. If you could just pick one, I think it would have to be Penn West. |
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MOCKBA
Heavy Crude
Joined: Sep 05, 2005
Posts: 460
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| Posted: Mon Oct 15, 2007 11:44 pm Post subject: Re: Oil royalty trusts? |
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Current Canadian government already evaporated 15% of the value of TSX in just one of the "investor friendly" moves. Now, in responce to Arabs buying one NG trust totally devalued by low NG prices and new tax law the government stated that they need to re-examine the rules a bit more and added "Canada is open for business, but is not for sale" - that's pretty much sums it - the biggest risk in investing in Canada is the government and the health of US economy comes only second.
We will see how they pass the test this Thursday. It would be the same for sealing the fate of canadian economy as last FED announcement.
Last January some CANROYs could be picked up bellow book and yeilding 20% and for a reason. 10%-15% today is a bit expensive considering the risks. On the upside the government helps a lot in destroying the value and creating blue plate specials for corporate raiders, but for whatever reasons they didn't materialize so far, apart from those arabs. I was expecting a lot more buyouts with valuations close to book. |
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sirrom
Heavy Crude
Joined: Feb 08, 2007
Posts: 197
Location: England
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| Posted: Tue Oct 16, 2007 5:47 am Post subject: Re: Oil royalty trusts? |
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so can i buy them if i live i england or can only americans and canadians buy into royalty trusts?
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MrBill
Expert
Joined: Sep 15, 2005
Posts: 5394
Location: Eurasia
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| Posted: Tue Oct 16, 2007 6:58 am Post subject: Re: Oil royalty trusts? |
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| sirrom wrote: | | so can i buy them if i live i england or can only americans and canadians buy into royalty trusts? |
Income trusts are a legal entity just like a publicly traded company, but with different tax treatments due to their pass through structure.
As a foreign investor you can buy income trusts like any other share. You might not even be aware you are buying an income trust instead of a regular common share unless you knew otherwise. So long as your broker allows you to buy Canadian stocks you can buy income trusts.
However, I am not familiar with the with-holding tax issue as a foreign investor, so maybe someone else can tell you? Mockba?
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MOCKBA
Heavy Crude
Joined: Sep 05, 2005
Posts: 460
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| Posted: Tue Oct 16, 2007 8:14 am Post subject: Re: Oil royalty trusts? |
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| MrBill wrote: |
However, I am not familiar with the with-holding tax issue as a foreign investor, so maybe someone else can tell you? Mockba? |
It is the same as any other foreign investment - broker would withhold what is due to the government (15% now in case of canadian dividends to foreign investors) and would report at the end of the year as taxes withheld which in case of US tax residents would be deducted dollar for dollar from total US tax liability. Tax change that they made into law after 3rd reading last June would really only punish the trusts since they cannot compete for capital with big guys and canadian pension funds and investors holding CANROYs in RRSP and such since the later would no longer have tax advantage. Foreign investors would have close to 40% withheld, but they were punished the least unless they are in tax heavens.
It is very interesting how differently different trust reacted to new law - some made arangements not to pay any tax till 2015, some choose to use the benefit of the new law today and come 2011 would be restructuring. The bottom line however is that instead of doing what you are suppose to be doing (developing niche oil and NG fields in case of CANROYs) in Canada you have to waste your time and resources fighting with bizzare government policies that change despite assurance from the government that they will not. Bizarely enough on the issue Canada has a record worthy of a developing country |
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MrBill
Expert
Joined: Sep 15, 2005
Posts: 5394
Location: Eurasia
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| Posted: Wed Oct 17, 2007 2:51 am Post subject: Re: Oil royalty trusts? |
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There is a reason I no longer live in Canada, but it upsets my mother when I point out that in many ways Canada is more like a Banana Republic than a developed country. But home is still where your heart is I suppose? ; - )
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