Profit From Canadian Royalty Trusts . . . While You Still Can!
Canadian income trusts may yet prove one of the best income investments of our time.
This lens will help you learn about how you can increase your investment income using these Canadian royalty trusts or CanRoys.
The best reference for Canadian trusts is the book Canadian Income Funds by Peter Beck and Simon Romano, which is available from Amazon.
But their desirability could go down dramatically if a certain Jim Flaherty, the Finance Minister of Canada, has his way. Just when the word about the great returns investors could get from Canadian royalty trusts was beginning to filter out to ordinary investors in the U.S., on October 31, 2006 (the "Halloween Massacre") Flaherty announced that they would not allow more corporations to convert to the trust structure, and beginning with 2011 all business trusts (except Real Estate Investment Trusts or REITs) would be subject to taxation.
This would destroy the entire reason Canadian trusts pay out such high dividends . . . they can do so now, because they do not pay taxes on any net profits which they pay out to their unit holders. If they must pay taxes on their net profits the same as corporations (which Flaherty has proposed for 2011 on), they will have less cash to pay to unitholders.
In the meantime, though, Canadian oil and royalty trusts, energy trusts, utility trusts and infrastructure trusts continue to pay out generous, often fast-increasing dividends to their unit holders.
I plan for this lens to help you add these still little known to the general public investments to beef up your income from investing.
Remember to rate this lens by clicking on one of the stars in the upper right hand corner!
Plus, be sure to sign my Guestbook and, if your lens is related to Canadian income trusts or any kind of income investing, include a link back to your lens.
Canadian Income Trust Poll
If you're a Canadian voter -- give Parliament a piece of your mind about income trusts
The Canadian government has proposed doing away with the tax-free treatment of income trusts or income funds. Canada is the largest politically stable source of oil and natural gas. Plus, the country contains many other natural resources in growing demand from the developing world. Doesn't it make sense to encourage investment and growth into these sectors?
The Safest Way to Profit From Investing in Canadian Income Trusts
How to find the proven, long-term winners
The risks of Canadian royalty trusts include:
1. Business risk -- they can have all the ups and downs of any business.
2. Political risk -- the current government wants to end their tax-free status.
3. Pricing risk -- many oil and other commodity trusts make more or less money depending upon world oil and commodity prices.
4. IPO/Reorganization risk -- not every corporation should convert itself into a trust. Sometimes what unitholders are buying is a shell game that benefits the corporate officers at their expense.
5. Return of capital risk -- some business trusts pay out more in dividends than they take in from their operations. This is not sustainable in the long run.
You can attempt to reduce these risks by buying only Canadian Royalty trusts rated highly by Standard & Poor's and DBRS (formerly Dominion Bond Rating Service) for stability of distributions.
However, let's face it -- this is public knowledge that's already factored into the market price of trusts.
I can't cite any academic studies, but my bet is that the market for Canadian income trusts is just as efficient as that for stocks. Therefore, all the advice to do your "due diligence" when you buy Canadian royalty trusts is just a cop-out --
You can't predict which income trusts are going to outperform the market . . . so, what to do?
I suggest buying only those trusts which are included in the Mergent Canadian Dividend Achievers index.
This list includes all Canadian companies (business trusts, real estate investment trusts and corporations) which have increased their dividend payout for at least the past five years. Those companies that cannot manage their businesses well enough in the long term to reward their owners with annual dividends increases . . . don't make this list.
I'd advise you to buy the exchange traded fund that tracks this index but, unfortunately, there is none -- yet. If you learn of one, please let me know.
Canadian Income Trusts Link List
More information on CanRoys
- Canadian income trusts
- My site contains 10+ pages on Canadian trusts, and it will grow over time.
- Canadian Income Funds: Your Complete Guide to Income Trusts, Royalty Trusts, and Real Estate Investment Trusts by Peter Beck and Simon Romano
- The best book on Canadian income funds. It was written for Canadians, but all income investors can profit more by learning about trusts.
- Trust Investor
- This site contains more news and education on investing in many kinds of trusts.
- Canadian Association of Income Trust Investors (CAITI)
- This organization was formed to lobby the Canadian government into keeping the tax-free status of Canadian business trusts. It deserves our support.
- Canadian Income Trusts -- Time to Buy or Dump?
- Article on Canadian income funds to help you decide whether or not they are right for you to add to your portfolio.
- Review of Canadian Income Funds
- Canadian Income Funds by Peter Beck and Simon Romano is an important book on Canadian income trusts of all kinds. This review gives more information on its contents.
- Canadian Association of Income Funds
- This is an industry trade group of Canadian income funds, with the goal of course of advancing their common interests. To the extent this will continue to give us income investors the option to be unit holders in good royalty trusts paying high monthly dividends, we should support them.
Canadian Income Trusts
Basic Information on Canadian Trusts
Learn all about Canadian royalty trusts and how to receive the high yields they're required to pay, thanks to their special tax-free status from the Canadian government.
Fetching RSS feed... please stand byReal Estate Investment Trust
Another terrific opportunity to earn a high investing yield
Real Estate Investment Trusts -- or REITs -- are also terrific income investing opportunities. Right now, thanks to the subprime debt crisis, yields are mouth watering. But equity REITs don't write or invest in mortgages, especially residential mortg...-
Investing in Real Estate Investment Trusts -- a Tremendous Income Investing Opportunity
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Although we invest our money to make more money, let's face it -- it's better to make investments that are also fun and interesting. That's why I like Real Estate Investment Trusts, With REITs, we're putting our money into providing people in Texas...
Canadian Business Trusts News
Blog posts to help you keep up to date on Canadian Royalty Trusts
The political and economic situation regarding Canadian income trusts is never static -- it's constantly changing, so I'm including this feed to help you stay up with the news on royalty trusts from blogs.
Fetching RSS feed... please stand byCanadian Income Trust Guestbook
Welcome, all income investors!
Everybody's welcome to learn more about Canadian royalty trusts, and all forms of income investments. We all need to learn how to invest for income. If your lens is related to Canadian income trusts or other income investments, please link back to it so that all visitors can learn from you also.
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RufusQuail
I've never heard of these, so thanks for the intro. Posted February 20, 2008 |
Interesting that REITs will be excluded from the upcoming Canadian changes in 2011. My commercial
Boulder Real Estate client chose a REIT in lieu of an actual building. The tax exemption for REITs would make them attractive I would think.
Posted September 17, 2007
