income trust
Prime Restaurants, $4.00, symbol EAT on Toronto (Shares outstanding: 6.5 million; Market cap: $26.2 million), holds certain trademarks and trade names that are used by a number of restaurants and pubs, including East Side Mario’s, Casey’s, and Pat and Mario’s. Prime Restaurants also holds trademarks and trade names used by Prime Pubs, a family of pubs that operates under the Fionn MacCool’s, D’Arcy McGee’s, Paddy Flaherty’s and Tir nan Og trade names. Prime Pubs also operates Bier Markt, a Belgian-style bar and restaurant. The trademarks are licensed to Prime Restaurants for 99 years. The company gets 3.25% of the revenues of the restaurants that use the trademarks....
The Data Group Income Fund, $7.27, symbol DGI.UN on Toronto (Units outstanding: 23.5 million; Market cap: $170.8 million), sells commercial-printing and related services to a wide variety of customers, including Canada Post, Bell Canada, Manulife Financial Corp., Bank of Montreal, Imperial Oil, Ontario Lottery and Gaming Corp. and British Columbia Lottery Corp. By outsourcing their printing needs to Data Group, the fund’s clients can focus on their main businesses and improve their efficiency. Data Group has three divisions:...
CANADIAN IMPERIAL BANK OF COMMERCE, $74.75, Toronto symbol CM, is buying the Canadian MasterCard credit-card business of U.S.-based Citigroup Inc. (New York symbol C). Right now, CIBC only issues Visa cards, so this purchase will diversify its credit-card business. The bank did not reveal the purchase price. However, the Canadian MasterCard business has $2.1 billion of outstanding credit-card loans. As of April 30, 2010, CIBC had $12.4 billion of credit-card loans outstanding. The bank expects to complete this purchase by October 31, 2010. It should add to CIBC’s earnings in the first year....
DUNDEE REIT $24.77 (Toronto symbol D.UN; SI Rating: Speculative) (416-365-3535; www.dundeereit.com; Shares outstanding: 35.5 million; Market cap: $879.7 million; Dividend yield: 8.9%) owns and manages 6.7 million square feet of office, industrial and retail space, including 48 office buildings and 34 industrial properties. Dundee reported revenue of $61 million in the three months ended March 31, 2010. That’s up 26.7% from $48.1 million a year earlier. 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 rose 35.4% in the latest quarter, to $16.6 million from $12.3 million. However, cash flow per unit fell 8.4%, to $0.54 from $0.59, on more units outstanding. The trust’s occupancy rate was 97% in the latest quarter, up from 95.4% at the end of 2009. Higher occupancy and acquisitions were the main reasons for the higher revenue and cash flow....
Pizza Pizza Royalties Income Fund, $6.79, symbol PZA.UN on Toronto (Units outstanding: 21.8 million; Market cap: $148.1 million), holds certain trademarks and trade names used by Pizza Pizza restaurants in Canada. The trademarks are licensed to Pizza Pizza for 99 years. In return, Pizza Pizza pays the fund 6% of the revenues of Pizza Pizza restaurants (9% on Pizza 73 restaurants) in Canada. The fund first sold units to the public at $10 a unit, and began trading on Toronto in June 2005....
SAPUTO INC., $29.71, Toronto symbol SAP, earned $382.7 million, or $1.83 a share, in the fiscal year ended March 31, 2010. That’s up 37.2% from $278.9 million, or $1.34 a share, in the prior year. The latest earnings matched the consensus estimate. Revenue rose just 0.3% during the year, to $5.81 billion from $5.79 billion. The company raised its cheese prices during the year. However, the higher Canadian dollar hurt the contribution of Saputo’s U.S. dairy operations, which account for 33% of its revenue. Saputo plans to finish consolidating its various southern Ontario warehouses into a single new facility later this year. That should lower its costs by $6.5 million a year, starting in 2011....
The federal government’s new tax on income trust distributions comes into effect just under seven months from now, on January 1, 2011. This new tax will put trusts on an equal tax footing with regular corporations. Many trusts have already converted to corporations in response, or plan to do so later in 2010 or in 2011. Others will continue to operate as trusts, although they may have to cut distributions to pay the new tax.
Tax exemption sets real estate investment trusts apart from other income trusts
...
Most real estate investment trusts (REITs), including our two recommendations below, are exempt from Ottawa’s income-trust tax, which comes into effect on January 1, 2011. Even so, we still advise against overindulging in REITs. But if you stick with REITs that have steady cash flows and sound balance sheets, like the two we recommend on this page, you should earn attractive long-term returns at relatively low risk. ALLIED PROPERTIES REAL ESTATE INVESTMENT TRUST $19.87 (Toronto symbol AP.UN; Units outstanding: 39.1 million; Market cap: $777.1 million; SI Rating: Extra Risk; Dividend yield: 6.6%) owns office buildings in Toronto, Montreal, Quebec City and Winnipeg. These mainly Class I properties contain over 5.7 million square feet of leasable area....
CRESCENT POINT ENERGY CORP. $38.44 (Toronto symbol CPG; Shares outstanding: 211.7 million; Market cap: $8.1 billion; SI Rating: Extra Risk; Dividend yield: 7.2%) produces oil and natural gas in western Canada. Its average daily production of 56,061 barrels of oil equivalent (including natural gas) is weighted 89% toward gas and 11% to oil. The company continues to focus on its light-oil Bakken development in southeastern Saskatchewan. Crescent Point plans to spend at least $750 million on exploration and development this year. As well, the company has agreed to buy the 79% of privately held Shelter Bay Energy that it doesn’t already own for $1.1 billion in shares. Shelter Bay’s production is mostly from the Bakken area, and will Crescent Point’s output by about 10%....
Ottawa’s new tax on income trusts comes into effect on January 1, 2011. When it does, it will put income trusts on an equal footing with regular corporations. That will prompt some income trusts to convert to conventional corporations. Others may continue to operate as trusts. Either way, the looming tax has made many investors wary of income trusts. However, some trusts remain well positioned for long-term gains, even with the new tax. These are trusts that operate stable businesses in strong and growing industries. One way we separate these trusts from those that will struggle — or worse — when the new tax kicks in is to look for trusts that have histories of raising their distributions, and plan to keep their payouts at current levels after January 2011....