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Stocks 502: Unconventional Equities

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1.
For tax purposes, dividends from real estate investment trusts are allocated to _______.
Choose wisely. There is only one correct answer.
All of the above. The situations for each of these returns differ.
2.
Why do nearly all royalty trusts have above-average yields?
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They are required to pay out essentially all of their cash flow as distributions. This results in relatively large yields for investors.
3.
If you invest in a master limited partnership that is held in a retirement account, you will not need to pay taxes on your earnings.
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False. You may have to pay taxes anyway. Earnings are not generally tax-deferred.
4.
If prices of the underlying commodities of a royalty trust fall, what will happen to the royalties that the trust normally pays out?
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They will fall. Since royalties are based on the underlying commodities, a fall in the commodities' prices will cause a drop in royalties.
5.
Cash flows from master limited partnerships tend to be _______.
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Stable. MLPs tend to be be very stable and produce consistent cash flows over time.