nun
Thinks s/he gets paid by the post
- Joined
- Feb 17, 2006
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These have been doing well (10% ish dividends) recently. Does anyone use them for income? What are your opinions, I'm a complete neophyte with them
These have been doing well (10% ish dividends) recently. Does anyone use them for income? What are your opinions, I'm a complete neophyte with them
Nun, if your talking about Canadian Oil & Gas Trusts, you should research if they plan on converting to a Canadian corp soon as required by Canadian law, or are they exempt. Converting requires they pay Canadian corp tax, reducing the unit/stockholder payout. Many of the converting trusts have dropped their payout dramatically. One other point. If they are Canadian corps or trusts, payment is additionally subject to a 15% Canadian tax. So you'll get only 85% of the payout. You'll have to file a fed 1116 form for each corp/trust to apply to recover that 15%. If held in an IRA, you cannot file a 1116. Only if you hold them in a taxable account.
If you plan to buy any, consider which market will you purchase them on. Many brokers charge $75/transaction for foreign stock on the OTC. And the stocks will not qualify for margin account, only a cash account. So you'll have to have the purchase cash collected funds at the broker. For a local purchase you'll have to use a Canadian brokerage account. I don't know what their restrictions are.
Better do more research before you jump in.
In that case a short answer should suffice. It is complex; and IMO a very inefficient area. Most buyers are individual investors who know close to nothing about an oil or gas well, depletion curves, tertiary recovery, etc. Right now, although there may be some reasonsable buys, royalty trusts are favorites of the yield chasers and I would not be interested. But over the years I have made a fair amount of money from payouts and from capital gains. Far more and far more regularly than indexing.I'm not considering buying, I was just interested in them as I don't know anything about them. I saw the returns and thought.....must be return of capital like with many closed end funds. I'm a committed Boglehead, but I like to know what's out there. I have friends who own
managed and closed end funds with high expenses who look with derision at my passive approach, but I like to understand the other side of the investing fence too so I can give as good as I get in the "discussions"