But the road to self-liquidation isn't as seldom taken as investors imagine. And as some savvy income investors know, royalty trusts, which pay out almost all of the income from the production of oil and gas to shareholders as these companies liquidate their reserves, offer exceptionally high yields, even after very strong recent appreciation. (A company can spin off part or all of its assets into a royalty trust. Production on the trust is farmed out to another oil or gas company.) For example, the BP Prudhoe Bay Royalty Trust (BPT, news, msgs), yields 9.9%, the Permian Basin Royalty Trust (PBT, news, msgs) yields 7.1%, the San Juan Basin Royalty Trust (SJT, news, msgs) yields 7% and the Santa Fe Energy Trust (SFF, news, msgs) yields 10.6%. Watch out for volatility in the share prices of these trusts. Since their entire income depends on the price of oil and gas, they can rise and fall sharply with the commodity. Conservative income investors should wait until they feel that the current correction in energy prices and energy stocks is close to an end before buying shares. But the most interesting income play in oil and gas, to my mind, lies in between the supermajors, who aren't likely to contemplate liquidation (and who own vast refining and retailing networks that don't fit the royalty trust model at all), and the existing royalty trusts. Investors who have half a decade or more before they need to generate income for retirement can put that time to work to generate yields that are certainly above what 10-year Treasury notes are paying now and probably above what 10-year notes will pay five to 10 years from now. (And, of course, these investors won't be giving up all gains in the interim, since they'll participate in whatever price gains energy stocks deliver.) How do you pull off this trick? By looking for oil and gas stocks that are paying relatively modest yields now but that are likely to raise dividends strongly as their oil and gas assets continue to bring in rivers of cash