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Strategies & Market Trends : Dividend investing for retirement
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To: straight life who wrote (9701)8/1/2011 12:27:46 PM
From: chowder  Read Replies (1) of 34328
 
I don't own any oil trusts and don't wish to own any. However, if the trusts operate the same way as the MLP's do, of which I own quite a few, it's not the payout ratio that you look at.

The MLP's are able to depreciate their assets to lower their tax base. Sort of like you and me taking deductions to lower our tax liability. For Social Security purposes, our listed income is lower than what we actually earned due to the tax write offs. So, our payout ratio for debt would be high based on that. Same for MLP's, and the same for trusts if they operate like MLP's.

It's not the earnings you focus on within this sector, it's the free cash flow that needs to be looked at, not the payout ratios.
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