mplaut

High-Yield Canadian Royalty Trusts vs. Dividend Growth Stocks

Too many people think that the Canadian Royalty Trusts are just a generic type of company and are interchangeable. They are not. There are well-run ones and poorly run CRTs. Look at Crescent Point Energy (CPG-UN.TO or CPGCF.PK). It has not cut its dividend and shows no signs of doing so. It is growing despite the headwinds. Its yield is correspondingly lower than the other CRTs but at over 10% it is still much higher than 3-4%.

There are also similar American companies, known as MLPs. The best ones are fully or nearly fully hedged (LINE, EVEP). They have not cut their distributions nor are they likely to in the near future (3+ years based on their hedges).

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

IMO one of the best Canadian royalty trusts just announced that it will convert to a corporation and continue to pay a high dividend: Crescent Point Energy. Very well managed, aggressively hedged, a big player in the high netback Canadian Bakken area. CPGCF in the US and CPG-UN.TO, but I guess it will lose the UN once it becomes a regular corporation.

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

Atlantic Power is a good company but it only yields 16% now. It seems like he got 20% by taking the stock price in USD and comparing it to the yield which is really in CAD. Price in USD=$5.29; Yield in CAD=$1.09

Price in CAD=$6.79; so real yield is 16%

It is a good company and is among the best, even with these numbers, IMO.

Canadian Royalty Trusts Will Never Return to Their Former Glory

I was wondering why you did not mention CPG in the article, but I see that you mentioned it in a comment.

I think that the arguments are basically correct and none of those who disagreed in the comments actually refuted any of the substantive points.

I think that the summary is that the Canroys are not good businesses the way most are run, and now that they are losing their tax advantages, they are left with their flawed business models, or flawed implementations of their good models.

I was also surprised - since you seemed to be in favor of Canroys converting to MLPs - that you did not recommend good MLPs for those who are interested in yield in O&G businesses. The good upstream MLPs, like LINE and EVEP, are great values now and their numbers are better than the Canroy numbers every were. LINE is 100% hedged until the end of 2011 and has around 20 years of reserves. It does not need to raise capital in the near future. Its distributions are tax advantaged for US investors, though not so for Canadians.