50% off isn't always a good thing! If you've been following so far, fellow Blogging Stocks contributor Sheldon Liber and I have been scratching our heads about high payout yields from energy trusts battered by the decision from the Canadian government to tax trusts. On the surface, examining the energy trusts' financials make it seem possible for them to sustain payouts at current rates, but for how long?

Well, income investors didn't have to wait long. Energy trusts shareholders will be in for a rude awakening to start the week. Last week, many notable energy trusts delivered bombshells by cutting their payouts - in a big way too!

Last Thursday, Shiningbank Energy Income Fund trimmed its distribution for the third time in the last 12 months. This only served as a prelude as a slew of cuts flew in last Friday. Enterra Energy Trust (NYSE:ENT) slashed its monthly payout by 50%. Precision Drilling Trust (NYSE:PDS) followed suit, reducing its distribution by almost 40%. Advantage Energy Income Fund (NYSE:AAV) would complete the hat trick, cutting its monthly payout by 17%.

Are you among the investors reeling from these announcements? If you feel inclined to blame the Canadian government, please take a closer look first! What are the wind-shifts in the industry outlook have caused these reductions, rather than the proposed tax levy?

Enterra Energy Trust (NYSE: ENT) closed last Friday at $8.12, up fifteen cents for the day and far above its a 52-week low of $6.68. While $1.44 would be a nice profit from that November 2006 low, it had been as high as $19.50 last January 2006.

The AOL Money & Finance Profile reads: Enterra Energy Trust trusts in the energy interred in geological strata. Through subsidiaries the trust acquires interests in petroleum and natural gas properties. Its principal operating subsidiary is Enterra Energy Corp., which explores for and produces oil, natural gas, and natural gas liquids in Western Canada (primarily in the Peace River Arch area). The trust's interests in crude oil and natural gas assets are held through Enterra Energy Corp., Rocky Mountain Acquisition Corp., and Rocky Mountain Gas Inc. Rocky Mountain Gas holds gas assets in Montana and Wyoming. The trust's proved and probable reserves are 19 million barrels of oil equivalent (boe), and its production averages 6,300 boe per day.

Earlier last week one of our readers brought ENT to my attention because James Cramer had recommended it a few months ago. I was floored when I took a brief look at the company and saw that Enterra Energy Trust is paying an 18.07% yield. That is very remarkable even to the 'untrained eye' - think novice investor. How long could that yield hold up? What is the rest of the story?

The ten-year chart above indicates that there was quite a lot of optimism about ENT the first 18 months of its public life, but that was followed by an internet bubble-type collapse from a high near $127.00 in late 1999. Its share price continued to deteriorate with from 2000 to 2002 after which it spent the last few years in a trading range between $5.00 and $10.00.

Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.

Penn West Energy Trust (NYSE: PWE) is a top conservative idea for 2007 from income expert Richard Lehmann, editor of The Forbes/Lehmann Income Securities Investor. He explains, "I am a steadfast believer in the Canadian oil and gas trusts, despite the Canadian government's decision, on October 31, 2006, to begin taxing the trusts as regular corporations after 2010.

"Currently, the trusts pay out income to investors as dividends and are not taxed on the corporate level. In addition, these dividends are treated as qualified dividend income for U.S. investors and subject to the preferential 15% tax rate.

"Recent proposed changes in the Canadian tax law slammed all trusts and brought PWE down from $37 to a current price of $31. This brings the yield up to almost 12%. I like Penn West because it is one of the largest trusts, with over nine years of proven reserves and extensive holdings of unproven ones.

"They have four years to restructure their finances to offset the increase in taxes -- something that may not even come about if past lobbying efforts are any indication.

"Given that the current dividend represents only 63% of cash flow, the monthly dividend is safe from cuts down to a $50 a barrel price for oil. Investors are likely to sell shares of Penn West to lock-in tax losses in December, but I see price appreciation early in 2007 as investors buy in for the irresistible yield."