Dividend Growth Investor

High-Yield Canadian Royalty Trusts vs. Dividend Growth Stocks

Thanks everyone for commenting on this post. While I am not a big fan of canroys I do agree that some allocation to them could be beneficial. What really concerns me are two things:

1) Dividends fluctuate greatly with cash flow and earnings

2) The 2011 Tax changes.

While manay Canroys such as PWE claim to have substantial tax pools going till 2013, US investors could see their taxable income from Canroys fall substantially assuming distributions remain unchanged.

A quote from Penn West's (PWE) 07 Annual Report goes as follows:

"If structural or other similar changes are not made … For U.S. investors, the distribution yield net of the SIFT and withholding taxes would fall by an estimated 25.1 percent in 2011 and 23.8 percent in 2012 and beyond."

The new Albertan Provincial Royalty Tax will hit the Trusts on their conventional production in 2009 with at least a 10 percent increase,

Currently, there is only a 15 percent Canadian withholding for US investors, but you could get tax credits in the US to offset that.

What truly worries me is that Canroy investors ignore these facts, which are pretty certain to occur nad instead keep HOPING that the US dollar and oil and nat gas prices would increase.

Canadian Energy Trusts: The Best Long Term Income and Dollar Hedge? (Part 2)

Cliff,

You seem to be a big believer in Canadian Income Trusts. I do not like the 2011 Tax Change, which could lead to distributions taxed very unfavorably for US investors.
I also do not like the volatility in Canadian Trust distributions. It's true that some of them spot double digit yields, but if distributions are cut the yield on cost end up less than a CD..
I feel much more comfortable buying the solid energy plays such as CVX, XOM and BP which are dividend achievers and have a proven track record of raising dividends and buybacks. They offer more solid and dependable dividend income stream in addition to the dividend growth potential and preferential tax treatment on their dividends.

The High Dividend Stock Investor's Collapsing Dollar Survival Guide, Part 3

What happens if the dollar does not collapse, but all the other currencies depreciate against it? When the WHOLE WORLD quotes their currencies exclusively against the dollar, and any major central bank in developed or developing countries is happy to keep dollar reserves you are talking about collapse of the dollar. Has it ever occured to you that the dollar is a global currency, not a local currency?

What happens if the deflationary cycle keep on going? The portfolio needs some allocation to assets that would do ok in a deflationary environment.

The High Dividend Stock Investor's Collapsing Dollar Survival Guide, Part 1

Aren't you afraid that concentrating your portfolio mainly in high yielding sectors will hurt your portfolio in the long term? for exampl many investors seeking the highest yielding financials got burned when the dividends were cut. Isn't it better to obtain a balances approach between dividend growth and dividend yield?

Stocks That Pay Monthly Dividends

Nice list. My favorite monthly dividend company is Realty Income.