Canadian Income Trusts

[willowbeezer]

Any thoughts on these investments. I have $100+ in AAV (Advantage Energy). Dividend yield is 10%+. Stock moved from $9 to about $12 in the last month or so with the steep rise in Nat Gas. Dividends are qualified ordinary dividends for tax purposes in the US. Price is a little volatile but have been a magnificient vehicle especially given high energy costs.

thoughts?

[kcowan]

I dumped mine last fall to crystallize some losses. Sitting on the sidelines for now. Beware that some of the payments are return of capital and reduce your ACB. Energy is probably pretty safe right now. And the extra taxes don't get applied for a couple of years.

[jimnjana]

I like the CANROYs, now probably not the time to jump into them with oil at record high. Only drawback is the canadian tax you pay on distros, but with yields over 10% that is something I'm willing to tolerate. Some issue w/future laws in Candada that strip CANROYs of their tax advantages, however w/oil so high and canada a safe place to do business, these trusts will continue to do well regardless.

Jim

[willowbeezer]

Taxes are withheld in canada (i think its 15%), but you get a foreign tax credit to offset dollar for dollar.

Most Conroys have "tax pools" or tax loss carryforwards for many many years beyond the 2010/11 change in tax treatment. By the way lots of political talk about keeping the income trust tax advantage for certain industries.

at 10%+ dividend yield, i am willing to ride this out to see what happens. Recently, Nat gas (AAV production is 60-70% Nat Gas, with the rest being oil) has risen big time and is projected to continue rising (CNBC analyst commenting on that today). We've seen a nice run so far and since its energy related, it provides decent diversification to the portfolio.

good luck all

[clifp]

The big worry I have about Canadian Income Trust is that tax laws in Canada have changed. Beginning in 2010, I believe the favorable tax treatment of them ends. I think this will have large impact on the yield and consequently the price.

I prefer Master Limited Partnerships on assets like pipelines or oil and/natural gas storage facilities which typical yield 7-8% and have a history of increase distributions.