What’s Different About Fording

Article Excerpt

FORDING CANADIAN COAL TRUST $34 (Toronto symbol FDG.UN; Aggressive Growth Portfolio, Resources sector; SI Rating: Average) is different from other income trusts. For one thing, it came into existence through the breakup of Canadian Pacific Railway, rather than as a new issue created to sell to investors. In addition, the company has vast reserves of coal. Mining could continue at current rates for 25 years; with further development, its reserves could last 100 years. Of course, the company’s cash distributions are bound to rise and fall with coal prices and with the volume of coal sold. But the current quarterly distribution of $1.00 a unit yields 11.8%. Most income and royalty trusts qualify as ‘Extra risk’ or ‘Speculative’ in our SI rating system, which requires us to make judgment calls on a number of key factors. We awarded Fording a rating of Extra risk when it began trading after the 2001 Canadian Pacific breakup, because we wanted to see how it did…

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