MV Oil Trust (MVO)

[MrBankRoll]

Top Picks 2011: MV Oil Trust (MVO)

Posted Dec 27th 2010 3:00PM by Steven Halpern

"MV Oil Trust (MVO) is a U.S. royalty trust which receives 80% of the royalties on all properties of MV Partners; these properties are located in the oil-prone regions of Kansas and Colorado," notes income expert Carla Pasternak.

The editor of High Yield Investing explains, "Currently yielding 7.8%, I have selected the trust as my favorite investment idea for the coming year.

"The trust had proved reserves of 8,800 thousand barrels of oil equivalent at December 31, 2009, from which it produced about 780 thousand barrels of oil equivalent, giving it an estimated 11.3 years of remaining reserve life.

"However, according to the trust agreement, the trust will terminate on the later of June 30, 2026 or when 11.5 Mmboe (millions of barrels oil equivalent) have been produced.

"To date, less than 4 Mmboe have been produced over the five years since inception in 2006. At the current rate, the trust should have about 10 more years before it expires.

"The average price MVO receives for its oil has varied dramatically depending on market conditions. This variation has led to historically wide fluctuations in quarterly distributions.

"Over the last four quarters, MVO has distributed a total of $2.76 in variable quarterly payments, for a trailing yield of close to 8% at recent prices.

"Most of the distributions are treated as return of capital, so the trust can be held in a taxable brokerage account.

"At less than 13 times trailing earnings of $2.76 per unit, the units are trading at a discount relative to the S&P 500's almost 15 times.

"And considering the shares carry a yield that's about four times more than that of the U.S. equity benchmark, the shares look extremely attractive. The average daily volume of around 118,000 shares a day also provides reasonable liquidity.

"For income investors looking for an oil play, this trust offers a superior yield and capital gains upside."

Steven Halpern's TheStockAdvisors.com offers a free daily review of the favorite stock ideas of the nation's top financial newsletter advisors.

http://www.bloggingstocks.com/2010/12/27/top-picks-2011-mv-oil-trust-mvo/