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Income Trusts
Features from this Topic
CAPITAL POWER INCOME L.P. $18.80 (Toronto symbol CPA.UN; Shares outstanding: 55.1 million; Market cap: $1.0 billion; SI Rating: Extra Risk; Dividend yield: 9.4%) has interests in 20 power plants in Canada and the U.S.
These facilities generate a total of 1,378 megawatts, and are mostly natural-gas fired. Capital Power sells all of its power under long-term contracts.
In the three months ended …read more »
Canadian income trusts have always involved far more risk than most investors realize. This is why we’ve recommended so few of them over the past few years.
2011 tax has changed the outlook for many Canadian income trusts
Ottawa’s new tax on Canadian income trusts comes into effect just over three months from now, on January 1, 2011. Many income trusts …read more »
FORT CHICAGO ENERGY PARTNERS L.P. $11.72 (Toronto symbol FCE.UN; Units outstanding: 143.8 million; Market cap: $1.7 billion; SI Rating: Extra Risk; Dividend yield: 8.5%) owns and operates energy pipelines and processing plants across North America. One of its major holdings is a 50% interest in the Alliance natural-gas pipeline, which runs 3,000 kilometres from Fort St. John, B.C., to Chicago. …read more »
Ottawa’s new tax on income trusts comes into effect just over four months from now, on January 1, 2011. When it does, it will put trusts on an equal footing with regular corporations.
Right now, income trusts pay out a high percentage of their cash flows to their unitholders. This lets them avoid paying corporate taxes. It also gives many …read more »
PENGROWTH ENERGY TRUST $9.97 (Toronto symbol PGF.UN; Units outstanding: 291.3 million; Market cap: $2.9 billion; SI Rating: Average; Dividend yield: 8.4%) has agreed to buy the 82% of Monterey Exploration (Toronto symbol MXL) that it doesn’t already own for $366 million in Pengrowth units.
Monterey produces oil and natural gas at properties in Alberta and B.C. Pengrowth is particularly interested in …read more »
BELL ALIANT REGIONAL COMMUNICATIONS INCOME FUND $26 (Toronto symbol BA.UN, Conservative Growth Portfolio, Utilities sector; Units outstanding: 127.3 million; Market cap: $3.3 billion; Price-to-sales ratio: 1.0; Dividend yield: 11.2%; SI Rating: Above Average) will convert to a dividend-paying corporation on January 1, 2011. That’s when Ottawa will start taxing income-trust distributions. Investors will receive one common share of the company …read more »
PEMBINA PIPELINE INCOME FUND $18.17 (Toronto symbol PIF.UN; Units outstanding: 163.5 million; Market cap: $3.0 billion; SI Rating: Extra Risk; Dividend yield: 8.6%) owns nine pipeline systems in western Canada. It also owns the Syncrude, Horizon and Cheecham pipelines, which transport crude oil from the Alberta oil sands, and a 50% interest in the Fort Saskatchewan Ethylene Storage Limited Partnership.
Pembina …read more »
DUNDEE REIT $24.77 (Toronto symbol D.UN; SI Rating: Speculative) (416-365-3535; www.dundeereit.com; Shares outstanding: 35.5 million; Market cap: $879.7 million; Dividend yield: 8.9%) owns and manages 6.7 million square feet of office, industrial and retail space, including 48 office buildings and 34 industrial properties.
Dundee reported revenue of $61 million in the three months ended March 31, 2010. That’s up 26.7% from …read more »
PRECISION DRILLING TRUST $7.13 (Toronto symbol PD.UN; Aggressive Growth Portfolio, Resource sector; Units outstanding: 275.6 million; Market cap: $2.0 billion; Price-to-sales ratio: 1.5; No dividends paid since February 2009; SI Rating: Extra Risk) provides contract-drilling services to oil and gas producers. Precision owns 351 drilling rigs, including 202 in Canada, 146 in the U.S. and three in Mexico and other …read more »
Ottawa’s new tax on income trusts comes into effect on January 1, 2011. When it does, it will put income trusts on an equal footing with regular corporations. That will prompt some income trusts to convert to conventional corporations. Others may continue to operate as trusts.
Either way, the looming tax has made many investors wary of income trusts. However, …read more »
Income Trusts
Income trusts are investments that hold income-producing assets. Their units trade on stock exchanges, but they flow much of their income through to unitholders as “distributions.” This means many trusts pay little or no tax, though the Canadian government plans to begin taxing trust distributions in 2011. Investing in trusts can be risky, as the businesses that underpin them may have steady cash flow, but could stagnate as the economy changes. Pat McKeough believes investors should look for trusts with low capital expenditures and mature businesses.
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