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Friday, October 12, 2007

Paramount Energy Trust - PMT.UN-T - New Top Pick

I picked up 5,000 units of Paramount Energy Trust (PMT.UN-T) for Under $8 this week. This is a risky pick because its 99% natural gas production.

Natural gas prices in Canada are very low and not very profitable.

However, Paramount has reduced their pay out to $0.10 per month ($1.20 per year) which results in a greater than 15% yield.

According to BMO research Paramounts "all-in" payout ratio is under 100% (all-in means cash distributions plus capital expenditures to maintain production) which means this trust is sustainable and high yielding.

If natural gas prices do recover then investors will see a nice capital gain. BMO's target price is $10 per unit. If paramount gets to $10 within a year then investors are rewarded with a total return of 40% (15% yield + 25% capital gain).

Now thats investing for income!

Please do your own due dilligence.

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