Archman Investor

High-Yield Canadian Royalty Trusts: What's the Catch?

These posts are all great and informative. I would just like to make one more comment. I currently am invested in a bunch of trusts.

The key to buying trusts should be the same as any stock. Sure, you could take a flyer on a stock and hope the price direction goes the way you want it to.

When I buy a trust I apply both the same fundamental and technical analysis I use when buying a US listed stock. Is the trust sound, earning revenue, able to maintain its current payout, and increase it in the future, etc.??

On the technical side, I typically do one of two things. One, I buy trusts that are technically strong, in uptrends, etc.
Examples of this are WTE.UN, PIF.UN, CAR.UN, all of which I have owned for a few years.

Caveat: Ofcourse unforseen earnings announcements, misdeeds, nuclear war, etc, could derail that, but investing always has risks.

Or, I buy a trust that is completely sound in every way, shape, or form, however the market has seen fit to destroy its share price. thus providing me a buying opportunity.
Examples of these are: APF.UN, CWI.UN, and GMP.UN. GMP is what I consider to a lesser extent to be the Goldman Sachs of Canada IMHO.

I own all of those trusts I mentioned. Yes for many trust holders, who have owned trust since before the OCT 2006 tax announcement, many of them have gotten killed even more, yet many of them have come back and are even higher than ever.

Investing is risky, its all part of the game.

On a side note I actually just bought my first US stock in over 16 months, now that it has a dividend established : PM. For all those that are against smoking, etc, I hope you will not hold it against me.

High-Yield Canadian Royalty Trusts: What's the Catch?

Trusts are taxed twice:

15% Canadian flat tax- which is recoverable at tax time, so yes you get it back when you file the correct tax form.

15% US dividend tax.

Trusts held in IRA's are treated differently.

High-Yield Canadian Royalty Trusts: What's the Catch?

I just want to add one further comment:
There are many Canadian trusts out there, not just Oil/ Gas Royalty trusts, which most people tend to focus on.

There are business trusts, power trusts, REITS, infrastructure trusts, etc, yielding anywhere from 6.5& to 12.%.

Though I am admittedly biased because I own about 9 of these trusts right now, do not be fooled by any doom and gloom articles.

Please see my post above.

Best.

High-Yield Canadian Royalty Trusts: What's the Catch?

The Canadian trusts are by far some of the best investments out there right now, and will continue to be.

Why?

The issue regarding the 2011 change is going to be moot for many of the trusts.
Many trusts, both oil and gas royalty, business, etc, have many different ways of holding their payouts steady if not increasing them beyond 2011. Beyond the "pools" cited, there are trusts that have huge amounts of "depreciation" they are going to claim, such as the pipeline trusts.
Power trusts and REITS are not affected at all by the Canadian tax change. (I happen to own a few of those to)

Plus, as of right now, the 2011 tax change is not even a done deal.
It may all be reversed.

There are trusts however that have no weapons to use against the tax change, thus should be watched carefully if one owns them.

Best.