Canadian Royalty Trust - CANROY

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DEFINITION of 'Canadian Royalty Trust - CANROY'

An oil, gas or mineral company that is organized as a trust rather than as a traditional corporation. The CANROY does not physically operate the oil, gas or mineral assets; operational activities are run by outside parties.


Because they are organized as a trust, Canadian Royalty Trusts initially were not taxed at the corporate tax rate. This allowed a CANROY to save more cash, which it used to pay a larger-than-average dividend to its investors. The Canadian government changed its tax policy.




BREAKING DOWN 'Canadian Royalty Trust - CANROY'

Investing in a royalty trust such as a CANROY allows the investor to gain exposure to the energy industry without having limited exposure to a certain company's operations. Because the primary draw of a CANROY is that it pays a high dividend, investors can experience higher volatility and risk when interest rates or oil prices change.


Royalty trusts tend to involve older mines and wells, meaning that the productivity of these assets is on the decline, and thus income from the trust declines over time unless more assets are purchased. Unlike royalty trusts in the United States, CANROYs may be actively managed and can acquire new properties (U.S. trusts have to stick to their original properties), allowing them to theoretically keep income levels stable.

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RELATED FAQS
  1. Can I put my IRA in a trust?

    You cannot put your IRA in a trust while you are living. You can, however, name a trust as the beneficiary of your IRA and ... Read Full Answer >>
  2. How does the trust maker transfer funds into a revocable trust?

    Once a revocable trust is created, a trust maker transfers funds or property into the trust by including them in a list with ... Read Full Answer >>
  3. What is the difference between a revocable trust and a living trust?

    A revocable trust and living trust are separate terms that describe the same thing: a trust in which the terms can be changed ... Read Full Answer >>
  4. How exactly does one go about revoking a revocable trust?

    The basic steps involved in revoking a revocable trust are fairly simple, and include transfer of assets and an official ... Read Full Answer >>
  5. What is the difference between a revocable trust and an irrevocable trust?

    An irrevocable trust and a revocable trust are differentiated through the ability to change the trust. With an irrevocable ... Read Full Answer >>
  6. How is maintenance of standard of living for survivors accomplished in estate planning?

    Estate planning is an integral component of comprehensive financial planning, as it allows individuals and couples to maintain ... Read Full Answer >>

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