income trust
AltaGas Ltd., $26.60, symbol ALA on Toronto (Shares outstanding: 81.9 million; Market cap: $2.2 billion; www.altagas.ca), mainly extracts, processes and distributes natural gas. It also processes natural-gas liquids and generates power in Alberta. AltaGas pays an $0.11 monthly dividend, which yields 5.0% on a yearly basis. The company gets most of its revenue under long-term contracts. These deals give it stable, predictable cash flow. AltaGas is trying to cut its reliance on the natural-gas business, but its growth-by-acquisition strategy, and investments in areas like wind and geothermal, add risk. However, power prices are rising in Alberta. That should push up the company’s cash flow....
Morneau Sheppell, $9.97, symbol MSI on Toronto (Shares outstanding: 47.9 million; Market cap: $478.0 million; www.morneaushepell.com), is the largest Canadian firm providing human resource consulting and outsourcing services. The company aims to help employers manage pensions and benefits, health and disability programs, and workplace training and education. Morneau Sheppell has 2,300 employees in offices across North America. It offers services to over 8,000 organizations in Canada, the U.S. and worldwide. Morneau Sheppell converted from an income trust on January 1, 2011. Prior to its conversion, it was called Morneau Sobeco Income Fund....
Pengrowth quickly became Canada’s largest oil and gas income trust after it was formed in 1989. As a trust, it paid out most of its cash flow to its unitholders. That left it with little to invest in exploration or growth projects. At the start of 2011, Pengrowth converted to a corporation in response to the federal government’s new tax on income-trust distributions, which came into effect on January 1 of this year. Unitholders received one common share for each unit they held. Now that it is a corporation, Pengrowth is using some of the cash from its conventional properties to expand into more risky areas, such as oil sands and shale gas. However, these projects have strong long-term potential, and their cash flows will help Pengrowth maintain its high dividend yield....
TransForce Inc., $15.02, symbol TFI on Toronto (Shares outstanding: 95.9 million; Market cap: $1.4 billion; www.transforcecompany.com), provides a variety of trucking services across Canada. Its trucking fleet is the largest in the country, with 9,500 trucks and 11,100 trailers. The company also has exclusive partnerships that extend its reach into the U.S. Montreal-based TransForce was an income trust from September 2002 to May 2008. The company has four main divisions:...
Chemtrade Logistics Income Fund, symbol CHE.UN on Toronto, is one of North America’s largest suppliers of sulphuric acid, sulphur, liquid sulphur oxide and sodium hydrosulphite. It also supplies sodium chlorate, phosphorous pentasulphide and zinc oxide. In addition to selling chemicals, Chemtrade processes spent acid. We analyze Chemtrade in Stock Pickers Digest, our newsletter for aggressive investing. In the three months ended March 31, 2011, the income trust’s cash flow per share jumped 55.6%, to $0.84 from $0.54. Revenue rose 33.8%, to $169.6 million from $126.8 million. This was mostly due to a recovering economy and higher prices for sulphuric acid....
PEYTO EXPLORATION & DEVELOPMENT CORP. $22.04 (Toronto symbol PEY; Shares outstanding: 133.1 million; Market cap: $2.9 billion; TSINetwork Rating: Extra Risk; Dividend yield: 3.3%; www.peyto.com) produces and explores for oil and natural gas in Alberta. The company changed its name from Peyto Energy Trust after it converted from an income trust to a dividend-paying stock on December 31, 2010. Peyto’s average daily production of 31,531 barrels of oil equivalent (including natural gas) is weighted 88% toward gas and 12% to oil. In the three months ended March 31, 2011, Peyto’s cash flow rose 9.8%, to $0.56 a unit from $0.51 a year earlier. The shares trade at 9.4 times the company’s forecast 2011 cash flow of $2.35 a share. Peyto’s long-term debt of $450 million is a low 15.5% of its $2.9-billion market cap....
ISHARES CDN REIT SECTOR INDEX FUND $14.98 (Toronto symbol XRE; buy or sell through a broker; ca.ishares.com) holds the 13 Canadian real estate investment trusts (REITs) in the S&P/TSX Capped REIT Index. The weight of any one REIT is limited to 25% of iShares CDN REIT Sector Index Fund’s value. iShares CDN REIT’s expenses are just 0.55% of its assets....
Vicwest Inc., $13.25, symbol VIC on Toronto (Shares outstanding: 17.4 million; Market cap: $230.7 million; www.vicwestinc.com) makes building-construction products, including roofing, decking and siding. It also makes building products for farm and industrial use, such as steel doors. It has 15 plants in Canada. The Oakville, Ontario-based company converted from an income trust to a conventional corporation on January 1, 2011. Prior to its conversion, it was called Vicwest Income Fund. In the three months ended March 31, 2011, Vicwest earned $0.15 a share. That’s up 7.1%, from $0.14 a share a year earlier. Revenue rose 7.8%, to $82.1 million from $76.1 million. The company holds cash of $2.7 million or $0.16 a share. Its long-term debt of $76.4 million is 33.0% of its market cap....
K-Bro Linen, $20.86, symbol KBL on Toronto (Shares outstanding: 7.0 million; Market cap: $149.1 million; www.k-brolinen.com), is Canada’s largest owner and operator of laundry and linen-processing facilities. The company first began trading publicly as an income trust in February 2005, at $10 per unit. K-Bro Linen Income Fund converted to a corporation on January 1, 2011. K-Bro processes more than 180 million pounds of linen from its seven plants across Canada. It gets about 75% of its revenue from customers in the health-care field. The rest comes from hospitality clients, such as hotels. K-Bro will benefit from two long-term trends: an aging population that needs more hospital and long-term care, and the trend toward outsourcing laundry. Stable cash flow from the company’s health-care clients adds further appeal....
Atlantic Power Corp., $15, symbol ATP on Toronto (Shares outstanding: 68.5 million; Market cap: $1.0 billion; www.atlanticpower.com), owns interests in 12 power plants across nine U.S. states. These plants have a total generating capacity of 1,948 megawatts; Atlantic Power’s share is 871 megawatts. The company also owns an 84-mile (135 kilometre) power-transmission system in California. As well, it is now building a biomass plan in Georgia (these plants generate electricity by burning plant materials and wood waste). The company also owns a majority interest in Rollcast Energy, which develops biomass power plants. Rollcast is currently working on several projects. Atlantic Power originally set itself up as a type of income trust in 2004. But unlike most trusts, it issued income participating securities instead of regular trust units. Each income participating security consisted of one common share and one debt security....