Royalty trusts and RRIFs
Royalty income trusts can be used in RRIFs to improve cash flow — some are currently generating yields of upwards of 10%. During periods of low interest rates, like now, these trusts can be used to enhance the low returns produced by traditional fixed-income securities such as bonds and GICs.
However, the risks associated with royalty trusts are quite high and the income is not guaranteed, unlike a bond. Therefore, you have to be careful with your selection. We recommended choosing lower-risk royalty trusts for a RRIF (for example, those involved with such industries as hydro generation) even though the yields are less than those available from energy trusts. – G.P.