income trust

CHEMTRADE LOGISTICS INCOME FUND $14.03 (Toronto symbol CHE.UN; TSINetwork Rating: Speculative) (416-496-5856; www.chemtradelogistics.com; Units outstanding: 30.7 million; Market cap: $430.3 million; Dividend yield: 8.8%) is one of North America’s largest providers of removal services for resource firms, such as oil refineries and base-metal processors. These companies create sulphur, acid and other by-products as part of their processing activities. Chemtrade converts these by-products into useful chemicals, like sulphuric acid. It also makes chemicals, such as sodium chlorate. In the three months ended December 31, 2010, Chemtrade’s cash flow per unit fell 31.7%, to $0.28 from $0.41 a year earlier. However, the decline was mostly because a fire forced Chemtrade to shut down its plant in Beaumont, Texas. High distribution appears safe ...

Davis + Henderson Corp., $19.48, symbol DH on Toronto (Shares outstanding: 59.2 million; Market cap: $1.2 billion; www.dhltd.com), converted from an income trust to a corporation earlier this year. The company is a leading printer of cheques. It also provides chequing and credit-card account management programs, lending-services technology, search and lien-registration services, student-loan processing, and credit-card processing. Davis + Henderson’s clients are mainly financial institutions. Davis + Henderson has cut its dividend since it converted to a corporation: it now pays $1.20 a share (down from the previous distribution of $1.84 a unit). The new rate gives it a 6.1% yield. It also recently paid a $0.15-a-share special dividend. Now that its distributions are dividends, they’re eligible for the dividend tax credit....

Real estate investment trusts (REITs) resemble income trusts, but with a key difference: REITs invest in income-producing real estate, such as office buildings and hotels. High-quality real estate investment trusts can make attractive, lower-risk additions to your portfolio. Even so, we continue to advise against overindulging in REITs. But if you’re thinking of investing in some of Canada’s top REITs, here are 2 reasons why now is a great time to do so:...

Oil now trades at around $110 U.S. a barrel. That’s up over 29% from $85 U.S. a year ago, and 175% higher than its low of $40 U.S. in February 2009. We think oil prices could rise even further if the global economy continues to rebound, as we expect. Even so, we continue to advise against overindulging in Canadian oil stocks. That’s because the Resource sector (including oil) is highly volatile, and no one can accurately predict future oil prices. However, you can profit nicely over long periods by investing a reasonable portion of your portfolio in well-established or well-managed Canadian oil stocks, especially those with high-quality reserves and rising production. These companies are well-positioned to profit during periods of high oil prices, and are able to at least partly offset price declines by producing more oil....

New Flyer Industries, $10.54, symbol NFI.UN on Toronto (Units outstanding: 49.5 million; Market cap: $521.5 million; www.newflyer.com), is a Winnipeg-based company that makes transit buses. New Flyer also provides parts and service. The company has one plant in Winnipeg and two in Minnesota. New Flyer offers a range of buses, including diesel, natural gas and electric, as well as energy-efficient gasoline-electric and diesel-electric hybrid models. New Flyer first sold units to the public at $10, and began trading on Toronto in August 2005. Each unit of New Flyer Industries represents an Income Deposit Security (IDS). Each IDS represents one common share of New Flyer Industries and a $5.53 principal amount of 14% subordinated notes. For the investor, each IPS distribution has two income components. For example, the monthly December 2010 payment of $0.0975 (Canadian) per IPS consisted of a dividend of $0.03298 (Canadian) per share, plus an interest payment of $0.06452 (Canadian). New Flyer’s annualized distribution of $1.17 gives it a current yield of 11.1%....

Premium Brands Holdings Corp., $16.89, symbol PBH on Toronto (Shares outstanding: 18.3 million; Market cap: $308.4 million; www.premiumbrandsholdings.com), took its current form on July 22, 2009, when it converted to a conventional corporation from an income trust. Before its conversion, it was called Premium Brands Income Fund. The company makes a wide variety of fresh and packaged foods. Its brands include Grimm’s (deli meats), McSweeney’s (meat snacks and pastries), Gloria’s (fresh sandwiches) and Duso’s (pasta). It sells these products, plus foods made by other companies, to over 26,000 retailers and restaurants in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario and Washington State. Premium Brands gets roughly half of its sales by selling its products through retailers. It gets the other half by selling food to restaurants, hotels and schools....

ARC RESOURCES LTD. $26.34 (Toronto symbol ARX; Shares outstanding: 275.9 million; Market cap: $7.3 billion; TSINetwork Rating: Speculative; Dividend yield: 4.6%; www.arcresources.com) produces oil and natural gas in western Canada. Its average daily production of 84,686 barrels of oil equivalent (including gas) is weighted 61% to gas and 39% to oil. In the three months ended December 31, 2010, ARC’s revenue rose 18.2%, to $329.3 million from $278.6 million a year earlier. Cash flow per share rose 10.0%, to $0.66 from $0.60. Increased production and higher oil prices pushed up results. The company has $803.6 million of debt. That’s a low 11.0% of its market cap. The shares trade at 8.8 times ARC’s forecast 2011 cash flow of $2.99 a share. It plans to spend $625 million on exploration and development this year, up 5.8% from 2010....

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. Chemtrade has three divisions: the Sulphur Products and Performance Chemicals division supplies 54.5% of the income trust’s revenue. Pulp Chemicals accounts for 8.5% of revenue. The International division supplies the remaining 37.0%. This division removes and markets sulpur and sulphuric acid outside of North America. In the three months ended December 31, 2010, the income trust’s cash flow per unit fell 31.7%, to $0.28 from $0.41 a year earlier. This was partly due to reduced production from a few of its larger sulphuric-acid plants, especially the plant in Beaumont, Texas, which had been damaged by a fire in 2008. That plant was shut down for half of the fourth quarter, forcing the company to use higher-cost supply sources and routes to make deliveries to customers....

DUNDEE REIT $30.90 (Toronto symbol D.UN; TSINetwork Rating: Speculative) (416-365-3535; www.dundeereit.com; Shares outstanding: 41.9 million; Market cap: $1.3 billion; Dividend yield: 7.1%) owns and manages 14.5 million square feet of office, industrial and retail space. The trust’s occupancy rate is 96.1%. In the three months ended December 31, 2010, Dundee’s revenue rose 61.8%, to $72.8 million from $50.2 million a year earlier. That’s mainly because the trust bought a number of new properties. Over the past 18 months, the trust has doubled the size of its property portfolio. That includes purchases totalling $922 million in 2010, and $462 million so far this year. The best way to measure a real estate investment trust’s operating performance is by looking at its cash flow, and Dundee’s cash flow per unit rose 5.8% in the latest quarter, to $0.55 from $0.52. Dundee pays a monthly distribution of $0.183, for a 7.1% annual yield. Because it’s a REIT, Dundee is exempt from Ottawa’s tax on income-trust distributions, which came into effect on January 1, 2011....

With interest rates still near historic lows, borrowing money to invest continues to look like an attractive investment strategy. That’s especially true if you borrow to buy well-established, dividend-paying stocks. For example, you could pick from the 19 companies we recommend in our Canadian Wealth Advisor newsletter’s Safety-Conscious Stock Portfolio. These investments give you regular dividend income and cash flow to pay the interest on your investment loan. (The Safety-Conscious Stock Portfolio is one of three portfolios Canadian Wealth Advisor offers to conservative and income-seeking investors. The other two are the Index Fund and ETF Portfolio and our Safety-Conscious Income Trust Portfolio. We continually monitor and update all three portfolios.)...