investment trusts

Real estate investment trusts (REITs) are exempt from Ottawa’s income-trust tax, which came into effect on January 1, 2011. That exemption makes REITs’ high yields more attractive, because most trusts have converted 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 $22.90 (Toronto symbol AP.UN; Units outstanding: 40.1 million; Market cap: $1.1 billion; TSINetwork Rating: Extra Risk; Dividend yield: 5.8%) owns office buildings in Toronto, Montreal, Quebec City and Winnipeg. These mainly Class I properties contain over 6.7 million square feet of leasable area....

The federal government’s tax on income-trust distributions has now been in effect for a little more than six months, since January 1, 2011. However, Ottawa feels the income-trust business structure is still appropriate for real estate investment trusts (REITs), so it has exempted REITs from the new tax. That’s great news for Canadian income seekers. What’s more, as we predicted in our Canadian Wealth Advisor newsletter, most REITs have moved up in the past year—including our recommendations. That’s because REITs’ high yields have attracted a lot of investor attention as trusts converted to corporations, or cut their distributions in response to the new tax....

Pathfinder Convertible Debenture Fund, $12.35, symbol PCD.UN on Toronto (Units outstanding: 10.0 million; Market cap: $124.0 million; www.middlefield.com/path.htm), is a closed-end fund that holds 73.5% of its portfolio in convertible debentures issued by publicly traded Canadian companies. The rest of the fund consists of common stocks, real estate investment trusts and cash. Convertible debentures are often promoted as offering more income than common stocks, and more growth potential than bonds. But it’s equally true that they offer less income than bonds, and less growth than stocks. We rarely recommend convertible or exchangeable debentures, because most expose investors to too much risk and too little profit potential. In effect, most convertible debentures are just low-quality, fixed-return investments....

The Dynamic Strategic Yield Fund is a mutual fund that holds mostly high-quality stocks and real estate investment trusts. But it also holds 35.2% of its portfolio in bonds. We don’t generally recommend bonds right now. That’s because bonds are unlikely to perform as well in the next few years as they have in the last few, mainly because interest rates will likely hold steady or rise. That means the fund would only earn interest income on its bonds; instead of capital gains, its bond holdings could produce capital losses. The fund has 34.4% of its bond holdings in corporate bonds. As a general rule, the safest bonds are issued by or guaranteed by the federal government. Next are provincial issues or bonds with provincial guarantees. After that come corporate bonds....

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....

Real estate investment trusts (REITs) are exempt from Ottawa’s income-trust tax, which came into effect January 1, 2011. That exemption makes REITs’ high yields more attractive, because most trusts have converted 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 $23.52 (Toronto symbol AP.UN; Units outstanding: 46.2 million; Market cap: $1.1 billion; TSINetwork Rating: Extra Risk; Dividend yield: 5.6%) 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....

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:...

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%)....

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....

Ottawa’s new tax on income trusts came into effect nine days ago, on January 1, 2011. The new tax puts income trusts on an equal footing with regular corporations. Some income trusts converted to conventional corporations before the new tax came into effect, or plan to do so in the coming months. Others will continue to operate as trusts. (In light of the new tax, we’ve analyzed some trusts that may be appropriate for income-seeking investors in a just-published issue of Canadian Wealth Advisor, our newsletter for conservative investing. One of these trusts has made a number of big investments in wind power. Read on for further details.)...