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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: S. maltophilia who wrote (78102)	9/13/2025 2:13:14 PM
From: E_K_S	Read Replies (1) \| Respond to of 78476

I have been eyeing some of these NG/Oil royalty Trusts to secure an income stream. However these too can stop the payments if/when expenses increase, new capital is deployed to expand reserves and/or the price of the underlining commodity falls. San Juan Basin Royalty Trust (SJT) has been one I have been watching but they continue to be in the arrears and have stopped all payments. Structure and Payments The cash flow of a royalty trust is directly dependent on two main factors: the volume of production and the price of the underlying commodity (oil or natural gas). The trust receives income from the operator of the property and, after deducting its own administrative expenses, distributes the remaining net proceeds to unitholders on a regular basis, often monthly. The amount of each distribution can fluctuate significantly because it is tied to these volatile variables. These trusts are often used for oil or gas fields that are already at or past their production peak, where the infrastructure is already in place. This structure is appealing because it avoids corporate-level taxation, as long as a high percentage (e.g., 90%) of its income is distributed to investors. The income is then taxed at the individual level. ----------------------------------------------------- My take away NOTHING is certain even the cash flows from a working oil/gas field.

To: S. maltophilia who wrote (78102)	9/13/2025 2:15:02 PM
From: Elroy	Read Replies (1) \| Respond to of 78476

Probably not. Though, like everything else, there's a reason to yield more than treasuries. Not exactly a growth situation: Sure, if their business completely collapses, the preferreds may blow. There's nothing to indicate the business is near collapsing. The main water business is actually growing sorta slowly. The other segments are slow. It's not a growth story. All the preferreds care about is whether the balance sheet is OK. It is, they produce about $150m more EBITDA than annual interest expense, preferred distribution cost and Cap Ex. That's the cushion, $150m. They don't need to grow, they just need that cushion to not turn negative. It's the safest 12% yielding security I've ever known. It's not a treasury (4%), but for a financial instrument yielding 12% it's about as safe as it gets. I was pumping it when it was $22, a few months ago, the story was the same. At $24 it's still nice, but you know, $22 was a better entry point. It collapsed from $24 to $20 in the April 2025 tariff thing, then recovered much more slowly than the market. The collapse from $24 to $20 was entirely macro driven tariff stuff, their Q2 2025 had some asset sales and also fundamental results that made their preferreds safer than they were in Q1 2025. Why it didn't jump right back to $24? They're very illiquid. It should probably be $25.50 as it's not that easy to get 11.8% of $25 these day each year.