Income Trusts

[PeterGTiR]

So, I have some cash that I want to invest.

One of the income trusts that I've looked at is trading at about $11 and it pays $0.15 in distributions every month. I realize that the distributions might dip lower in future years, but at the current level and over a year, that's 16.5% in dividend payments.

Other than the taxation of income trusts similar to corporations starting in 2011, is there anything else I should be looking out for?

Does anyone else know of any income trusts with high dividend yields that I should be looking at?

What's everyone's take on this?

[roopi]

What trust is it? You need to make sure it is earning more per unit than it is paying out. If it isn't then for sure the distribution will be cut and the unit price will take a hit.

[ckangarloo]

Sounds like SPB to me. Not a bad choice. They are still milking the tax break from purchasing some Ballard shares I believe.

[PeterGTiR]

Originally posted by roopi
What trust is it? You need to make sure it is earning more per unit than it is paying out. If it isn't then for sure the distribution will be cut and the unit price will take a hit.

There's Enervest that's trading at about $10.75 - they had a substantial loss in Q4 of 2008 that appear to be from investing or financing.

And even Superior Plus that's trading at about $10 also. $0.14 distributions per month over 12 months is about 16%.

Then there's Enerplus that's trading at around $23 - income in Q1 2009, all of 2008 and 2007. They have distributions of $4.23 in the past year. If I bought today and they paid similar dividends in the future, it'd work out to about an 18% annual return.


I realize that the past is no indication of future events and that tax wise, these trusts are converting in the near future. Are there any other issues I should be concerned about?

[ExtraSlow]

SPB is excellent because they aren't an income trust anymore, yet they still pay, and will continue to pay, high dividends.

"stable" High yield trusts:
che.un - chemtrade, Chemicals
SPX.UN - supremex, paper and envelopes.
RSI.UN Rogers sugar
PBI.UN Premium Brands, meat snacks and packaged foods
PBI is interesting, as it has bought some tax credits so it can convert to a corporation and still not pay tax for a couple years. Similar to that Superior (SPB) did with ballard.

Dividend paying corporations:
newalta NAL
Russel metals RUS
pulse seismic psd
computer modeling group CMG.

[ExtraSlow]

quick bump to see if anyone has any more to say about thier favourite income trusts or income producing corporations.

[TomcoPDR]

Parkland Industries PKI

Edit: Fas Gas stations and oil refiney based in Red Deer

[Criticull]

altagas...13%+ yield right now. (ala.un)
interpipeline...9% yield right now (ipl.un)
pembina pipeline...10% right now (pif.un)

These energy infrastructure companies have a lot of take-or-pay contracts, so you're not as exposed to gas or oil price fundamentals. That said, when prices are up, they close a lot more deals to build and maintain infrastructure. They've all had good earnings in Q2 (edit: IPL hasn't released earnings for Q2 yet, my bad).

[ExtraSlow]

Key.un - Keyera is also a great energy infrastructure company. Their current yield is over 9%, they have a great history of divdend increases.

[snoop101]

Direct cash


Best time to buy right now too.http://www.google.com/finance?q=TSE:DCI.UN

[PeterGTiR]

I was looking at mutual funds today and BMO has their BMO Global Monthly Income Fund:

http://www4.bmo.com/mutualfund_navigator/0,4695,35649_26224939,00.html?cat=0&tab=1

The monthly distributions are $0.055 and the current unit price is $5.2783 for an annual return of about 12.5%. I can live with that type of return.

It's inline with income trusts - distributions and a little bit of price appreciation over time.

There are drawbacks though - administration fees and then it's limited to BMO. Other banks probably have similar mutual funds though.

[ExtraSlow]

A MER of 2.36% means the return is actually only about 10%.
And that kind of distribution will change over time, so it's not guaranteed or anything.
Myself, I'm not a fan of actively managed mutual funds simply due to the high expense and lack of performance. Not to mention many funds (not sure about this one) have fees in addition to MER, known as loads.
As you point out, this is no better than lots of income trusts, and they charge you a fee just for getting similar performance. The kicker is that if they have a bad year and under perform the market, they'll still charge you that fee.
And yes, other banks and investment houses will have a similar product, which I'll dislike for similar reasons.

I'm sticking to ETFs when I want diversification, and individual, carefully chosen equities when i want a specific goal, like income.

[Criticull]

Of the restaurant top-line trusts, Pizza Pizza (PZA.UN) has a 15% current yield. They've been hanging out at 30% below September levels pretty much all year.

Not sure if people have stopped ordering Pizza 73 because of the recession, but I would expect cheap pizza to be somewhat resilient. Since I don't like the pizza though, I remain hesitant. Q2 results out tomorrow.

[Sugarphreak]

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