income trust

Richards Packaging Income Fund, $8.31, symbol RPI.UN on Toronto (Units outstanding: 10.0 million; Market cap: $83.1 million; www.richardspackaging.com), is a full-service packaging distributor that serves small- and medium-sized North American businesses. The fund first sold shares to the public at $10 a unit, and began trading on Toronto in April 2004. Richards distributes more than 5,000 different types of rigid-packaging containers, which are made from stiff plastic and include bottles, caps, trays and food cups. The fund gets these containers from over 600 suppliers, and makes them at its own manufacturing facilities. Richards’ customers include over 10,000 regional food, wine and spirits, cosmetic, pharmaceutical and other companies. Richards also offers packaging design and helps customers choose the appropriate packaging with factors such as usability, child resistance and their brand image in mind. It also offers logistics-management services, through which Richards maintains an appropriate supply of inventory for a customer in a nearby warehouse and makes deliveries on an as-needed basis....

Baytex Energy, $54.91, symbol BTE on Toronto (Shares outstanding: 112.3 million; Market cap: $6.2 billion), produces and explores for oil and natural gas in western Canada. The company converted from an income trust to a corporation at the start of this year. In the three months ended September 30, 2010, Baytex’s cash flow per share rose 21.7%, to $1.01 from $0.83 from a year earlier. Revenue rose 14.5%, to $238.3 million from $208.2 million. Baytex’s average daily production rose 5.1%, to 44,799 barrels of oil equivalent (this measure includes natural gas) from 42,623 barrels. The company’s production is weighted 80% to oil (65% heavy oil from the Alberta oil sands and 15% light oil) and 20% to natural gas. The company’s $464.6 million of debt is a low 7.6% of its market cap...

PEYTO EXPLORATION & DEVELOPMENT CORP. $19.61 (Toronto symbol PEY; Shares outstanding: 121.9 million; Market cap: $2.4 billion; TSINetwork Rating: Extra Risk; Dividend yield: 3.7%; www.peyto.com) is the new name of Peyto Energy Trust after it converted to a dividend-paying corporation on December 31, 2010. Peyto produces and explores for oil and natural gas in Alberta. Its average daily production of 32,500 barrels of oil equivalent (including natural gas) is weighted 85% toward gas and 15% to oil. At current production rates, Peyto has proven oil and natural-gas reserves that should last 11 years. Peyto’s cash flow was $0.47 a unit in the three months ended September 30, 2010. That’s up 20.5% from $0.39 a year earlier. The shares trade at 8.6 times the company’s forecast 2011 cash flow of $2.28 a share. Peyto’s long-term debt of $455 million is a reasonable 19% of its $2.4-billion market cap....

ISHARES CDN REIT SECTOR INDEX FUND $14.43 (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. RioCan REIT is the fund’s largest holding, at 24.5%, followed by H&R REIT (12.4%), Canadian REIT (8.9%), Calloway REIT (8.4%), Boardwalk REIT (7.3%), Primaris Retail REIT (5.8%), Canadian Apartment Properties REIT (5.8%), Dundee REIT (5.4%), Chartwell Seniors Housing REIT (5.0%), Cominar REIT (4.7%), Artis REIT (4.2%), Allied Properties REIT (3.8%) and Extendicare REIT (3.3%)....

Precision Drilling Corp. (symbol PD on Toronto) provides contract-drilling services to oil and gas producers. Precision owns 355 drilling rigs in Canada, the U.S. and Mexico. Precision recently converted from an income trust to a regular corporation. Investors received one common share for each trust unit they held. The change is in response to Ottawa’s new tax on income-trust distributions, which came into effect on January 1, 2011. In 2010, the resource stock’s revenue rose 19.4%, to $1.4 billion from $1.2 billion in 2009. Higher drilling activity was the main reason for the gain. Precision earned $62.1 million, or $0.22 a share. That’s down 61.6% from $161.7 million, or $0.63 a share, in 2009....

BCE INC., $35.90, Toronto symbol BCE, continues to profit from recent upgrades to its wireless and high-speed Internet networks. As a result, BCE’s earnings rose 11.9% in 2010, to $2.2 billion from $1.9 billion in 2009. The company spent $500 million on share buybacks in 2010. Because of fewer shares outstanding, earnings per share rose 13.6%, to $2.84 from $2.50. These figures exclude costs related to a restructuring plan, which included cutting jobs, relocating employees and selling excess real estate. The latest earnings also beat the consensus estimate of $2.83 a share. Revenue rose 1.9% in 2010, to $18.1 billion from $17.7 billion. Wireline revenue (which accounts for 57% of BCE’s total revenue) rose just 0.3%. New high-speed Internet and satellite-TV subscribers offset lower local and long-distance telephone revenue. At the end of 2010, the company had 2.1 million high-speed Internet subscribers (up 2.0% from a year earlier) and 2.0 million TV subscribers (up 3.7%)....

These two former income trusts recently converted to corporations in response to Ottawa’s tax on income-trust distributions. That means they must now pay corporate taxes. Even so, their high payouts (which are now dividends) seem secure. PENGROWTH ENERGY CORP. $12 (Toronto symbol PGF; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 326.0 million; Market cap: $3.9 billion; Price-to-sales ratio: 2.4; Dividend yield: 7.0%; TSINetwork Rating: Average; www.pengrowth.com) is the new name of Pengrowth Energy Trust. It produces oil and natural gas from properties in Alberta, B.C. and Saskatchewan. Pengrowth also holds interests in other energy projects, such as its 8.4% stake in the Sable Offshore Energy Project, which operates three offshore-drilling platforms south of Nova Scotia. Roughly 60% of the company’s production is natural gas. The remaining 40% is oil. Low gas prices have hurt Pengrowth’s earnings and held back its cash flow. However, it has locked in prices for 23% of its 2011 daily production at $5.72 per thousand cubic feet. That’s higher than today’s price of $4.30. Pengrowth focuses on proven properties with large reserves and predictable production. That helps cut its risk....

Real estate investment trusts (REITs) are exempt from Ottawa’s income-trust tax, which came into effect January 1, 2011. That exemption is making REITs’ high yields more attractive as trusts convert to corporations or cut their distributions in response to the new tax. Our REIT recommendations have all moved up, but we still think they offer attractive long-term returns at relatively low risk. ALLIED PROPERTIES REAL ESTATE INVESTMENT TRUST $21.54 (Toronto symbol AP.UN; Units outstanding: 42 million; Market cap: $904.4 million; TSINetwork Rating: Extra Risk; Dividend yield: 6.1%) owns office buildings in Toronto, Montreal, Quebec City and Winnipeg. These mainly Class I properties contain over 6.3 million square feet of leasable area. Class I refers to 19th and early 20th-century light industrial buildings that have been restored and converted to office and retail space. These properties usually feature high ceilings, natural light, exposed beams, interior brick and hardwood floors....

VERESEN INC. $12.83 (Toronto symbol VSN; Shares outstanding: 145.6 million; Market cap: $1.9 billion; TSINetwork Rating: Extra Risk; Dividend yield: 7.8%) is the new name of Fort Chicago Energy Partners L.P. after it converted to a corporation on January 1, 2011. Veresen 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. Enbridge Inc. owns the other 50%. Veresen and Enbridge also own 85.4% of the Aux Sable natural gas liquids plant. As well, Veresen owns 100% of the 1,324-kilometre Alberta Ethane Gathering System....

Northland Power Inc., $16.09, symbol NPI on Toronto (Shares outstanding: 72.6 million; Market cap: $1.2 billion; www.northlandpower.ca), is the new name of Northland Power Income Fund after it converted from an income trust to a corporation on January 1, 2011. Northland owns interests in nine power projects that together generate over 1,050 megawatts of electricity. These projects include renewable-power projects, such as natural-gas-fired plants, wind farms and biomass projects. The company sells its power almost entirely under long-term contracts, with an average length of 14 years. Northland’s plants are located in Canada, the U.S. and Germany. In addition, the company is building other plants, including the 86-megawatt Spy Hill natural-gas fired project, the 260-megawatt natural-gas-fired North Battleford project and the 100-megawatt Mont Louis wind farm, all in Canada. It also has 216 megawatts of wind, solar and run-of-river projects in advanced stages of development in Ontario. All of these projects have been awarded under the Ontario Power Authority’s feed-in-tariff program....