Focus on Trusts with High-quality Assets

Article Excerpt

We advise you to use caution when investing in income trusts, and to limit your trust investments to no more than one-sixth of your total portfolio. Many income trusts, particularly those that have been assembled and sold to the public as new issues in the past few years, come with hidden risks that can eventually hurt their profits and force them to cut their distributions. When that happens, unit prices plummet. In choosing income trusts to recommend, we look beyond high current yields and weigh the quality of a trust’s assets. In trusts as in stocks, it’s crucial to make sure you are investing in an attractive business with healthy long-term prospects and the ability to survive the inevitable setbacks that periodically come to every business. By relying on these high requirements, we managed to zero in on top performers like Fording Coal, while staying out of the disasters that have plagued the group and will continue to harm unwary trust investors. Here are…

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