Paul Tracy

Right now, you can buy one of my favorite royalty trusts at an incredible price. In fact, I think the opportunity is so good, I've decided to include this security as one of my Top 10 Stocks for July 2012.

If you're unfamiliar with royalty trusts, then you can read my previous analysis here.

In a nutshell, royalty trusts exist for one reason... to take in millions of dollars in royalties and pass that money to investors in the form of distributions.

So far, this strategy has been extremely successful. In the past decade, I've seen royalty trusts return as much as 687%... 1,558%... and even 2,730%.


Those weren't some "one-off" opportunities that you had to be lucky to find either. In just six months, the royalty trust I'm about to tell you about returned 80% after I added it to my Top 10 Stocks portfolio last October. 

And I think a similar opportunity is setting up once again...

The trust I'm referring to is SandRidge Mississippian Trust (NYSE: SDT), one of 27 active oil and gas royalty trusts trading on U.S. exchanges.

As a royalty trust, SandRidge Mississippian Trust owns a stake in dozens of wells run by its parent company, SandRidge Energy (NYSE: SD)

SandRidge Energy takes care of the drilling, production, marketing, and selling of the oil and gas produced (production is split roughly 40/60 between oil and gas). The royalty trust -- SDT -- is passive in the relationship. It doesn't have to do a thing. In return for the initial investment when it went public, its investors get a cut of all the oil and natural gas sold from the wells.

For the Mississippian Trust, SandRidge Energy packaged a 90% interest in 36 of its oil and natural gas wells in Oklahoma. In other words, for every dollar in oil or gas pumped by these more than three dozen wells, owners of the royalty trust are entitled to 90 cents in royalties.

But that's just the start...