dividend tax credit
PENGROWTH ENERGY CORP. $12.66 (Toronto symbol PGF; Shares outstanding: 320.1 million; Market cap: $4.1 billion; TSINetwork Rating: Average; Dividend yield: 6.7%; www.pengrowth.com) is the new name for Pengrowth Energy Trust after it converted to a dividend-paying corporation on January 1, 2011. Pengrowth has large tax pools it can use to offset the new taxes. That will let it keep its monthly payout at $0.07 a share, for an annualized yield of 6.6%. The monthly payout will be in the form of a dividend. That means investors who hold Pengrowth outside an RRSP will benefit from the dividend tax credit. Pengrowth is still a buy.
Investors are paying more attention to dividend yields (a company’s total annual dividends paid per share divided by the current stock price) as stock markets continue to recover. Companies are responding by doing their best to maintain, or even increase, their dividend payments. That’s good news for investors, because dividends are more dependable than capital gains as a source of income. A couple of decades ago, you could assume that dividends would contribute up to a third of your long-term investment returns, without even considering the tax-cutting effects of the dividend tax credit. Earlier in this decade, dividend yields were generally too low to provide a third of investment returns. But now that yields have moved up and interest rates have moved down, it’s realistic to assume they will once again contribute as much as a third of your total return....
PENGROWTH ENERGY TRUST $12.96 (Toronto symbol PGF.UN; Units outstanding: 320.1 million; Market cap: $4.1 billion; TSINetwork Rating: Average; Divid. yield: 6.5%; www.pengrowth.com) will convert to a dividend-paying corporation on January 17, 2011. It will then trade as Pengrowth Energy Corporation under the symbol “PGH”. Pengrowth has $2.7 billion of tax pools it can use to offset income taxes. It expects to be able to delay paying taxes until after 2014. That will let Pengrowth keep paying $0.07 a month (it now yields 6.5%). Starting with the February 15, 2011, payment, the monthly payout will be in the form of a dividend. That means investors who hold Pengrowth outside an RRSP will benefit from the dividend tax credit....
ARC ENERGY TRUST $25.59 (Toronto symbol AET.UN; Units outstanding: 275.9 million; Market cap: $7.0 billion; TSINetwork Rating: Speculative; Dividend yield: 4.7%; www.arcresources.com) will convert to a dividend-paying corporation on January 17, 2011. It will then trade as ARC Resources Ltd. under the symbol “ARX”. ARC has $2.2 billion of tax pools it can use to offset income taxes. That will let it keep paying $0.10 a month (it now yields 4.7%). Starting February 15, 2011, these dividend payments will benefit from the dividend tax credit if you hold your shares outside of an RRSP or a RRIF. ARC Energy is still a buy.
BELL ALIANT INC. $26.70 (Toronto symbol BA: Shares outstanding: 127.4 million; Market cap: $3.4 billion; TSINetwork Rating: Above Average; Yield: 10.9%; www.aliant.ca) is the new name of Bell Aliant Regional Income Fund after its conversion to a dividend-paying corporation on January 1, 2011. Bell Aliant has over 3.1 million telephone customers in Atlantic Canada and rural parts of Ontario and Quebec. BCE owns 44.1% of Bell Aliant. The conversion forces Bell Aliant to pay income taxes. In response, the company will change the rate and frequency of its payout. Starting in March 2011, it will switch to quarterly dividends of $0.475 a share. The new annual rate of $1.90 (down from $2.90) will yield 7.1%, based on today’s price....
Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you specific advice on successful investing, including tax shelters. Each Investor Toolkit update gives you a fundamental piece of investment strategy, and shows you how you can put it into practice right away. Tip of the week: “These 3 powerful strategies will help you make the most of your RRSP tax shelters” Registered Retirement Savings Plans, or RRSPs, are the best-known and most widely used tax shelters in Canada....
Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you specific advice on making successful stock market investments. Each Investor Toolkit update gives you a fundamental tip and shows you how you can put it into practice right away. Tip of the week: “In the long run, share buybacks can complement your dividend profits.” Stock market investments have two main ways to distribute their profits to shareholders. They can pay dividends, or they can buy back their own shares. Both dividends and buybacks pay off for investors. Here are 3 reasons why:...
CHEMTRADE LOGISTICS INCOME FUND $14.04 (Toronto symbol CHE.UN; SI Rating: Speculative) (416-496-5856; www.chemtradelogistics.com; Units outstanding: 30.7 million; Market cap: $431.0 million; Dividend yield: 8.5%) is one of North America’s largest suppliers of sulphuric acid, sulphur, liquid sulphur dioxide and sodium hydrosulphite. It also supplies sodium chlorate, phosphorous pentasulphide and zinc oxide. In addition to selling chemicals, Chemtrade processes spent acid. Chemtrade has three divisions: The Sulphur Products and Performance Chemicals division supplies about 59% of the fund’s revenue. Pulp Chemicals accounts for 10% of revenue, and the International division supplies the remaining 31%. This division removes and markets sulphur and sulphuric acid outside of North America.
Environmental market is secure
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PENGROWTH ENERGY TRUST $12.42 (Toronto symbol PGF.UN; Units outstanding: 320.1 million; Market cap: $4.0 billion; SI Rating: Average; Dividend yield: 6.8%; www.pengrowth.com) produces oil and natural gas in western Canada and off the Nova Scotia coast. Its production is weighted 51% to oil and 49% to gas. In the three months ended June 30, 2010, revenue rose to $337 million from $335.6 million a year earlier. Cash flow per unit was unchanged at $0.56. Higher oil and gas prices offset a drop in production. Poor weather hurt Pengrowth’s production and drilling levels. The trust will convert to a dividend-paying corporation on December 31, 2010. The change is in response to Ottawa’s new tax on income-trust distributions, which comes into effect on January 1, 2011. After the conversion, the company will be called Pengrowth Corporation....
Labrador Iron Ore Royalty Corp., $59.65, symbol LIF.UN on Toronto (Units outstanding: 32.0 million; Market cap: $1.9 billion), is the new name for Labrador Iron Ore Royalty Income Fund. The company holds a 7% gross overriding royalty (or 7% of the selling price for each iron-ore product produced, sold and shipped) and a 15.1% equity interest in Iron Ore Company of Canada (IOC). On top of that, Labrador Iron Ore gets a $0.10-per-ton commission on all iron-ore products IOC makes, sells and ships. IOC, which has produced iron-ore concentrate and pellets since 1954, is Canada’s largest iron-ore producer, and is among the world’s top-five makers of iron-ore pellets. Rio Tinto (symbol RTP on New York) is IOC’s operator and majority shareholder, with 58.7% of its shares. Mitsubishi Corp. of Japan holds the remaining 26.2%....