Canadian Guy

High-Yield Canadian Royalty Trusts vs. Dividend Growth Stocks

All non-real estate Royalty Trusts will be forced to change their structures to corporations after 2011. For some, like Penwest or Pengrowth it wil mean changing monthly distributions to quarterly dividends. If the payout amounts do drop a bit it may not be that much since the world economy will have recovered (at least partially) by then and oil prices should have increased enough to improve the trusts profitability.

As for real estate trusts, while the U.S. market continues to get crushed, the Canadian market looks to be more like a cyclical down cycle. RIOCAN is a multi-billion dollar real estate trust paying out approximately 10% with a record of NEVER having cut its distributions. It is well run and has a highly diversified porfolio of shopping malls and office towers, with an average occupancy of 97% and the vast majority still being 100% occupied. In their retail malls they have anchor tenants like the big 5 Canadian banks, Wal-mart, or large grocery stores, so their malls always have traffic.

While the 2011 change will mean that RIOCAN can no longer use mezzanine financing to raise cash it does not mean it will be forced to change its structure to a corporation and it will continue to be profitable and pay out its distributions.

Sorry to sound like an advertisement, but I researched alot of them and have made RIOCAN one of my core Canroy holdings.