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Canadian Energy Trusts: The Best Long Term Income and Dollar Hedge?

notagoldbug,

A few comments:

1) The 2011 legislation has already been factored into the current pricing of income trusts.

2) In 2011, most income trusts will convert to a standard corporate structure and the income will be distributed as dividends. Corporations will pay taxes on the income before distribution, but since dividends have a more favorable tax treatment, you can recoup this tax paid by the corporation as a tax credit provided your income trust is held in outside a retirement account (i.e RRSP, LIRA, IRA, etc).

3) ) I have no problem with distribution cuts when the price of oil and gas drops or if the redirected cash is used for paying down debt faster (a good idea in this low interest environment) or acquiring new reserves.

4) Canroy and MLPs are not the same thing. MLPs distribute cash from depleting assets. Canroys are permitted to acquire new properties and replenish their assets, which MLPs are not permitted to do.

Canadian Energy Trusts: The Best Long Term Income and Dollar Hedge?

I would also add the two following Canroys in addition to ERF.

COSWF.PK is a well management company with oil sands reserves greater than 40 yrs. Yield is currently 12% and it is trading at 50% of its 2008 high.

PWE is another excellent Canroy. Yield is 28% and its reserve life is 10 yrs. It is trading at 33% of its 2008 high and I would expect the yield to be cut to half at some point.

Update on Three Canadian Oil Royalty Trusts

Paultaut,

Have you seen the beating HTE has been getting lately ? It has dropped more than 35% in the last week. I could not find any HTE related news, but suspect they are planning a major dividend cut. They are currently paying a "nose bleeding" high of 52% in dividends. I suspect this will drop to 26%, if not 14% in next week's announcement.

I have HTE as well as ERF, PWE & COSWF which have all made major dividend cuts in the last few months.

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

The 2010 Canadian Income Trust legislation is not cast in stone.
The current minority Conservative has lost much of its popularity and has been embroiled in a few scandals recently. The Liberal party will most likely capitalize on the dissent around income trusts and implement a more equitable income trust structure (or even the old structure).

The only changes the income trust structure in Canada really needed was to prevent companies like Bell Canada and Telus which have no legititmate reason to be income trusts, other than to use the favorable tax treatment to make up for their incompetent management.