income trust

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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NorthWest HealthCare Properties REIT, $11.58, symbol NWH.UN on Toronto (Units outstanding: 25.2 million; Market cap: $292.3 million; www.nwhp.ca) owns 48 income-producing properties, with a focus on medical office buildings. The real estate investment trust (REIT) is Canada’s largest non-government owner and operator of medical office buildings. In all, NorthWest’s properties contain about 3.0 million square feet of leasable area. The REIT’s properties are located in B.C., Alberta, Ontario, Quebec, Nova Scotia and New Brunswick. NorthWest has a 90.3% occupancy rate. The REIT first sold units to the public for $10 each, and began trading on Toronto on March 25, 2010....

Chemtrade Logistics Income Fund, $13.91, symbol CHE.UN on Toronto (Units outstanding: 30.7 million; Market cap: $426.6 million; www.chemtradelogistics.com), 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 first sold units to the public for $10 each, and began trading on Toronto in July 2001. 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 Chemtrade’s revenue, and the International division supplies the remaining 31%. This division removes and markets sulphur and sulphuric acid outside of North America....

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. The best REITs have good management and balance sheets strong enough to weather an economic downturn. They also have high-quality tenants, and they carefully match their debt obligations with income from their leases. The best ones are still doing well, despite the weak economy, and are taking advantage of low interest rates to refinance long-term mortgages. We advise against overindulging in REITs. But high quality REITs can make attractive, low-risk additions to your portfolio....

Most real estate investment trusts (REITs), including our recommendations, are exempt from Ottawa’s new tax on income-trust distributions, which comes into effect on January 1, 2011. As a result, these REITs should continue to attract investor interest as the tax prompts more trusts to convert to corporations and cut their distributions. RIOCAN REAL ESTATE INVESTMENT TRUST $23.15 (Toronto symbol REI.UN; Units outstanding: 250.9 million; Market cap: $5.8 billion; SI Rating: Average; Dividend yield: 6.0%; www.riocan.com) is Canada’s largest REIT. RioCan has interests in 289 shopping malls across Canada, including 11 under development. In all, these properties contain over 66 million square feet of leasable area. The trust has a 97.1% occupancy rate. RioCan is Canada’s largest owner of neighbourhood shopping centres, which are enclosed malls in smaller cities. But the trust’s strongest growth is in its “New Format” malls, in the suburbs of larger cities. RioCan is Canada’s largest owner of these malls, which have lots of parking and room for new building, and mainly consist of big-box stores, or large stores that are usually part of a chain....

ISHARES CDN REIT SECTOR INDEX FUND $14.04 (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 25%, followed by H&R REIT (12.7%), Canadian REIT (9.3%), Calloway REIT (8.2%), Boardwalk REIT (7.1%), Primaris Retail REIT (5.6%), Dundee REIT (5.4%), Chartwell Seniors Housing REIT (5.2%), Canadian Apartment Properties REIT (5.1%), Cominar REIT (4.9%), Allied Properties REIT (3.7%), Extendicare REIT (3.7%) and Artis REIT (3.7%)....

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....

PEMBINA PIPELINE CORPORATION $22.05 (Toronto symbol PPL; Shares outstanding: 164.5 million; Market cap: $3.6 billion; SI Rating: Extra Risk; Dividend yield: 7.1%; www.pembina.com) is the new name of Pembina Pipeline Income Fund following its conversion to a dividend-paying corporation on October 1, 2010. Pembina aims to keep paying $0.13 a month, at least through 2013 (it now yields 7.1%). The fund believes that cash flow from its $440-million Nipisi and Mitsue pipelines, which it expects to start up in mid-2011, will let it maintain its payout. As well, Pembina has tax losses that it can use to delay taxation under Ottawa’s new income-trust tax until 2012....

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%....

ENCANA CORP., $28.26, Toronto symbol ECA, fell 7% this week after the company reported lower-than-expected earnings. In the three months ended September 30, 2010, Encana earned $98 million, or $0.13 a share (all amounts except share price in U.S. dollars). These figures exclude a $331-million gain on hedging contracts that the company uses to lock in selling prices for its natural gas, and a $140-million foreign-exchange gain. On this basis, the latest earnings fell well short of the consensus estimate of $0.19 a share. They were also down 74.1% from the company’s year-earlier earnings of $378 million, or $0.50 a share. Cash flow per share fell 9.4%, to $1.54 from $1.70. (Note: The year-earlier figures assume that the breakup of the old EnCana Corp. into the new Encana and Cenovus Energy Inc. took place at the start of 2009 instead of December 1, 2009.)...