Canadian Royalty Trust - CANROY

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.

RELATED TERMS
  1. Alimony Substitution Trust

    A trust agreement in which a divorced person agrees to pay spousal ...
  2. Credit Shelter Trust - CST

    A type of trust that allows a married investor to avoid estate ...
  3. Canadian Income Trust

    A type of corporate structure as designated by the Canada Revenue ...
  4. Grantor Retained Annuity Trust ...

    An estate planning technique that minimizes the tax liability ...
  5. Beneficiary Of Trust

    A beneficiary of trust is a person for whom a trust was created, ...
  6. Rabbi Trust

    A trust created for the purpose of supporting the non-qualified ...
Related Articles
  1. Options & Futures

    An Introduction To Canadian Income Trusts

    Yields in excess of 10% aren't rare, but these unique investments need to be chosen very carefully.
  2. Stock Analysis

    Does A 10%-Plus Yield Sound Crazy? Not With This Investment

    A long time ago, in a financial world very unlike today's, investors could earn decent returns with just a savings account and certificates of deposit issued by the local bank.#-ad_banner-#Many ...
  3. Stock Analysis

    Canadian Royalty Trusts Offer Relative Safety And High Income

    Generous dividend yields should limit the downside for this group.
  4. Retirement

    Should You Put Your Faith In A Trust?

    Many institutions want a piece of your portfolio, but trusts can provide a one-stop shop.
  5. Retirement

    How To Set Up A Trust Fund In Australia

    No, they're not just for the super-rich. But you need to know the rules.
  6. Retirement

    How To Set Up A Trust Fund In The U.K.

    A guide to the whys and wherefores of setting up this most versatile of estate-planning instruments in the United Kingdom.
  7. Stock Analysis

    A Brush With Royalty Trusts

    These three high yielding trusts have become even more attractive after the recent selloff.
  8. Stock Analysis

    Cash In On Canadian Oil Sands

    Claymore Securities rolled out the first U.S. ETF that focuses solely on the Canadian oil sands.
  9. Your Clients

    Advisors: Tips for When to Employ Living Trusts

    Revocable living trusts accomplish estate planning objectives that aren't possible with a will. Here are some of the cases that show when to use a trust.
  10. Personal Finance

    Surprising Uses for Trust Funds

    Here are five common situations where a trust fund makes financial sense.
RELATED FAQS
  1. What is the difference between a royalty trust and a master limited partnership?

    Find high-yield opportunities in natural resources through royalty income trusts or master limited partnerships, and learn ... Read Answer >>
  2. What is the difference between revocable and irrevocable intervivos trusts?

    Learn what an inter-vivos trust is, the difference between an irrevocable and a revocable inter-vivos trust, and why it is ... Read Answer >>
  3. Will I have to pay taxes every year when I receive the $25,000 from my trust fund?

    My inheritance is in the form of a trust fund that distributes $25,000 per year for 10 years. ... Read Answer >>
  4. What are the keys to setting up a trust fund?

    Setting up a trust to secure your assets for a beneficiary allows you to set the terms under which the beneficiaries are ... Read Answer >>
  5. Are life insurance trust proceeds taxable?

    I am due 1/3 of a $1 million irrevocable trust from my mom. I want to close out the trust and wonder what taxes may be involved ... Read Answer >>
  6. Do beneficiaries of a trust pay taxes?

    Learn how interest income from a trust is taxed, and understand when this money is taxable to the trust and when it is taxable ... Read Answer >>
Hot Definitions
  1. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  2. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  3. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  4. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  5. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  6. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
Trading Center