investment trusts
There are a number of difficulties with recommending a model portfolio for all investors. The main one is that each individual has different objectives, acceptable risk levels and so on. For example, conservative or income-seeking investors may want to emphasize utilities and banks for their high and generally secure dividends. More aggressive investors might want to increase their portfolio weightings in resources or manufacturing stocks. As well, any model portfolio would need to be continually monitored and updated as individual stocks rise and fall in value and as a percentage of the total....
Even though today’s house prices are high, mortgage interest costs are near historic lows. And owning your own home has a number of advantages. For example, owning your house is a great tax shelter. That’s because gains on your principal residence are exempt from capital-gains taxes. However, this tax benefit only applies to your principal residence. You must still pay tax on gains on the sale of a recreational property, such as a cottage or a ski chalet. But these properties generally appreciate at a much slower rate than, say, a home in a major urban centre.
Many investors underestimate the risk and cost of owning rental property
...
Most real estate investment trusts (REITs), including our recommendations, are exempt from Ottawa’s income-trust tax, which comes into effect on January 1, 2011. As a result, these REITs should attract investor interest this year, as many income trusts convert to corporations and cut their distributions. Even so, we 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. RIOCAN REAL ESTATE INVESTMENT TRUST $18.73 (Toronto symbol REI.UN; Units outstanding: 241.8 million; Market cap: $4.5 billion; SI Rating: Average; Dividend yield: 7.4%) is Canada’s largest REIT. RioCan has interests in 258 shopping malls across Canada, including 12 under development. In all, these properties contain over 60 million square feet of leasable area. The trust has a 97.4% occupancy rate....
Many Canadian firms have tried to expand into the U.S. over the years. Some, like Tim Hortons (symbol THI on Toronto), have had difficulty in the United States. Other companies’ expansion efforts have failed miserably. Canadian Tire (symbol CTC.A on Toronto) provides a memorable example of a failed U.S. expansion. In 1982, the retailer bought a chain of Whites automotive-retail stores in Texas. By 1985, Canadian Tire had lost $300 million on this purchase. That’s when the company decided to sell the division and retreat to Canada. Its stock price has since gone up more than 600%.
This real estate investment trust’s U.S. expansion adds risk — and potential rewards
...
Most real estate investment trusts (REITs), including our two new 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 $19.55 (Toronto symbol AP.UN; Units outstanding: 39.0 million; Market cap: $763.3 million; SI Rating: Extra Risk; Dividend yield: 6.8%) owns office buildings in Toronto, Montreal, Quebec City and Winnipeg. These mainly Class I properties contain over 5.8 million square feet of leasable area. Allied has a 96.2% occupancy rate....
ISHARES CDN REIT SECTOR INDEX FUND $12.03 (Toronto symbol XRE; buy or sell through a broker) holds the 10 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 this index’s value. RioCan REIT makes up 23.7% of the iShares CDN REIT’s total value, followed by H&R REIT (15.7%), Canadian REIT (12.0%), Boardwalk REIT (9.9%), Calloway REIT (9.1%), Primaris Retail REIT (6.8%), Canadian Apartment Properties REIT (6.5%), Chartwell Seniors Housing REIT (5.8%), Cominar REIT (5.7%) and Extendicare REIT (4.2%). The fund yields 5.7%. Its expenses are 0.55% of its assets....
The best real estate investment trusts (REITs) continue to have high occupancy rates. They are also renewing leases at a steady pace. As well, today’s low interest rates are helping many REITs save money on mortgage refinancing, or fund expansion. Most REITs, including our recommendations, are exempt from Ottawa’s new income-trust tax, which comes into effect on January 1, 2011. We still advise against overindulging in REITs. But if you stick with REITs that have steady cash flows and sound balance sheets, like the three we recommend on this page, you should earn attractive long-term returns at relatively low risk....
Ottawa’s new tax on income trusts comes into effect just over a year from now, on January 1, 2011. When it does, it will put trusts on an equal footing with regular corporations. Right now, trusts pay out a high percentage of their cash flows to their unitholders. This lets them avoid paying corporate taxes. It also gives many of them significantly higher yields than a lot of dividend-paying common stocks. The new tax will eliminate these income-tax benefits. That will prompt some income trusts to convert to conventional corporations. Others may choose to remain as trusts. (For our latest advice on income trust investing, and how trusts should fit into your overall portfolio, be sure to download our free report, “Canadian Stock Market Basics: How to Trade Stocks and Make Good Investments in Canada.”)...
You’ll find our mutual-fund ratings (Aggressive, Conservative or Income) displayed next to every fund we recommend in our Canadian Wealth Advisor newsletter. They’re key to helping us find top-performing funds, including those that are suitable for income investing. (To show you how our system works, we’d like to share one of the income investing fund buys we recently recommended in Canadian Wealth Advisor. Please read on for full details.) Rating mutual funds is more complex than rating individual companies. When we judge a company’s investment quality, we take nine key factors into account....
GUARDIAN MONTHLY HIGH INCOME II FUND $10.66 (CWA Rating: Income) (GGOF Guardian Group of Funds, Commerce Court West, Suite 4100, P.O. Box 201, Toronto, Ontario M5L 1E8. 1-800-668-5613; Web site: www.ggof.com. Available from brokers) continues to emphasize more stable real estate investment trusts (REITs) and high-quality, long-lived resource trusts that pay out a low percentage of cash flow as distributions. This should help the fund keep distributions high even after Ottawa’s tax changes in 2011. Guardian Monthly High Income II pays a $0.06 monthly distribution, for a 6.8% yield. The fund has an MER of 2.30%....