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Royalty trusts

Is it risky to build a portfolio of royalty trusts?

Q – Is it riskier to build a portfolio of royalty trusts, as opposed to dividend stocks? Why? – Filipe W.

A – It’s very difficult to build a diversified portfolio of royalty trusts, simply because there are very few of them. We have only a couple on our recommended lists. The Keg Royalties Income Fund and Richards Packaging Income Fund, both Income Investor recommendations, are examples.

Some mining companies use a royalties business model to generate income (Franco-Nevada is an example), but they are set up as corporations, not trusts.

But unless you want to include REITs (which really are not royalty trusts), there’s not much to choose from.

So, your question should really be: “Is it possible to build a portfolio of royalty trusts”. The answer is no. – G.P.