What is your take on Canadian trust?
I'm nearing retirement and have been aquireing a large amount of HTE, PGH, and AAV for their dividend's. What would your advice be? Thank you
Answers
107 points
JerryH answered 2 years ago …
Hi! Terry: I have been an owner of HTE and PGH for awhile. I bought them and others in November of 2006. I have been very satisfied with PGH and PVX. HTE I sold in November right before the market drop for a profit. The outlook for their earnings were not looking good and I was thinking they were going to cut dividends. I also own CNE and PWE, I am not very satisfied with their performance after the announcement of their merger. The reaction caught me by surprise. I am watching them very closely now. They are about where I bought them and the divdends have been great from both, especially PWE.
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904 points
jillybeansisme answered 2 years ago …
While I'm not familiar with all of the ones you mention, I did own PWE for a short time. I wasn't satisfied with the performance and have since sold it. As to Canadian trusts, I like them for the dividends, but it is very important that you be aware that the Canadian Government is going to begin taxing foreign investors (you and me) beginning (I'm not totally sure of when) I believe in 2009. As much as I hate to, I plan to sell my holdings before then.
Have a Great '08!
2775 points
Oldman answered 2 years ago …
I do hold a lot of CanRoys. Not all will be adversely affected by the Harper Govt.'s decision to change the royalty trust taxation from pass-through to ordinary business taxation in 2011.
Currently, the Canadian Govt. withholds 15 % of the dividends (the income in excess of maintenance, development and direction) that is generated by a royalty trust. Since the directors and management could reasonably grow their own salaries, as long as, REIT-like, they paid a good deal of income to investors, the royalty system flourished so well that new ones kept emerging, and the Harper administration decided to stop this "tax leakage". Boy did the share prices tumble. Only the largest and financially the strongest of the CanRoys survived. Some, with mainly U.S. operations, or with stapled shares (bonds + shares) or REITS, will probably continue, unaffected. Others, with huge resources, such as Enerplus and Vermillion, may become Limited Partnerships; others like Arctic Glacier and Yellow Pages Income Fund may continue and pay taxes, at a reduced rate. So not all of the CanRoys are going to pot. So, first - a couple of informationals: taxation change is set for 2011, not 2009. Second, economic considerations (the increased cost of tar sand cooking and product shipping, or the pine forest beetle) determine share valuations, and for mixed gas & oil producers,its the balance between their gas and oil production vs the gas and oil futures: Advantage is hostage to gas; Harvest is hostage to transport: Arc Energy to Oil; Timberwest to Lumber shipping costs, etc. Some of these company's shares have now become targets for foreign takeovers, such as PrimeWest... af few more of these and Harper may regret his Oct. 31, 2006 decision. Again, the Canadian Govts. taxation will occur at the corporation level, on the corporations's Canadian income. The 15 % taxation of dividends, whether from financial institutions such as Manulife or Royal Bank of Canada, or the current royalty trusts won't be changing. What will change is whether the pass through of income from operations will remain as dividends to investors. REITs in Canada will not be affected.
One place to see the status of these CanRoys is a fairly expensive "Canadian Edge" newsletter from Roger Conrad at KCI Finance; I don't subscribe to this. Another place is the TSX listings and the Pink Sheets (OTC-Other_Nasaq). Another free site is Quantum Online
to which I donated and got really good links and info. The free site, StockCharts,com has an excellent alphabetical listing sysem of US and Canadian securities with good charts and the ability to compare graphically, the performance of a number of securities. But, that site also has the PinkSheet coding for the securities that trade off of the 3 main markets in the US. So if one looks up Arc Energy, one finds the TSX symbol and also the Pink Sheet symbol, AETUF, because Arc and Vermillion and TimberWest and Peyto, annd,,, have Pink Sheet symbols, that aren't always obvious from their TSX ---/UN names. I hope this fills out some of your concerns about Canadian Royalty trust payments, and their possible future.
