Wednesday, September 10, 2008

Solid High Yield Income Trusts Candidates to Park Your Money

If you are looking for places to safely park your money in the months ahead, while earning a good return in the meantime, you may be interested in some Canadian income trusts.

TAX LAW. The taxation for income trusts will change in 2011. At that point, income trusts will lose some of their tax advantages. It is expected that some income trusts will revert back to corporations. Others, have tax advantages that carry over for a few more years. In any case, until then there is plenty of time to invest in them.

YIELD: In choosing an income trusts you want a good dividend yield, but not exaggerated (which typically mean a return of your capital as opposed to a dividend payment). You capital may also decrease depending on the business the income trusts is involved in. For example, some income trusts invest in car dealerships. This is not likely to be a good investment when a recession is happening now, or is around the corner.

It used to bet that most Canadian income trusts were in the energy field (among other reasons, to attract foreign capital). These trusts have gone up in price when the price of oil went up, and have now come down. If oil continues to drop to around $80, they may still have some downside. It is also possible that some of the oil and gas trusts could cut their distributions if the price of the commodity drops. This was for example, discussed in the latest meeting of the Board of AN.UN (you can see it from their financial reports on their web site).


The income trusts listed below were filtered out of a list of a couple of hundred of them. They are either rated 4 or 5 stars by the Globe and Mail. They are:

(Please click on images to enlarge)

They are shown in detail below. Star rating is shown below each symbol.

A&W Revenue Royalties Income Fund is a Canada-based limited purpose trust. It is established to invest in A&W Trade Marks Inc. (Trade Marks), which owns the A&W trade-marks used in the A&W quick service restaurant business in Canada.

Canadian Oil Sands Trust is an open-ended investment trust. The Trust has a 36.74% working interest in the Syncrude Joint Venture (Syncrude). Syncrude is involved in the mining and upgrading of bitumen from oil sands in Northern Alberta, and is operated by Syncrude Canada Ltd. (Syncrude Canada). Syncrude Canada operates oil sands mines, utilities plants, bitumen extraction plants and an upgrading complex that processes bitumen into a sweet crude oil. Syncrude's production is sent by pipeline to Edmonton area refineries and to pipeline terminals, which ship it to refineries in Canada and the United States. The Syncrude Project is located 40 kilometers north of the town of Fort McMurray in Alberta, Canada. Syncrude's leases are in the sweet spot of the Athabasca Oil Sands deposit, spanning over 102,000 hectares and holding enough crude oil resource to produce 500,000 barrels per day for more than 50 years.

NAL Oil & Gas Trust is an open-end investment trust created to acquire a royalty from NAL Energy Inc. (NAL) and to issue trust units to the public. NAL acquires oil and natural gas properties and sells a royalty to the Trust entitling the Trust to 99% of the revenues from the properties held by NAL. The Trust also receives distributions, directly or indirectly, from NAL GP, Ventures Trust, Addison LP, NAL Energy GP, NAL Energy LP, NAL Partnership and 1331899. As of December 31, 2007, the Trust held assets in Southeast Saskatchewan, Central Alberta, Sylvan Lake, Alberta, Pine Creek, Alberta, and Monkman, British Columbia. During the year ended December 31, 2007, the production totaled 20,501 barrels of oil equivalent per day. The Trust is managed by NAL Resources Management Limited, which is a wholly owned subsidiary of Manulife Financial Corporation. On August 31, 2007, NAL closed the acquisition of Seneca Energy Canada Inc.

Noranda Income Fund is a Canada-based, open-ended trust. The Fund was created to acquire Xstrata Canada Corporation's (Xstrata Canada) CEZinc Processing Facility (the Processing Facility), located in Salaberry-de-Valleyfield, Quebec. Xstrata Canada is a wholly owned subsidiary of Xstrata plc. The Fund distributes the cash generated by the Processing Facility, to its unit holders. The primary objective of the Fund is to provide monthly cash distributions to its unit holders. During the year ended December 31, 2007, the Fund processed approximately 514,000 tons of zinc concentrate. Canadian Electrolytic Zinc Limited acts as the manager of the Fund.

Pizza Pizza Royalty Income Fund is a limited purpose, open-ended trust established to indirectly, through the Partnership, acquire the trademarks and trade names used by Pizza Pizza Limited (Pizza Pizza) in its Pizza Pizza and Pizza 73 restaurants. On July 24, 2007, the Partnership acquired the trademarks and other intellectual property of Pizza 73 (the Pizza 73 Rights) from Pizza 73, Inc.

Penn West Energy Trust is an open-ended investment trust. The Trust's principal undertaking is to issue Trust Units, and to acquire and hold securities of subsidiaries, net profits interests (NPI), royalties, notes and other interests. Its direct and indirect subsidiaries and partnerships carry on the business of acquiring, developing, exploiting and holding interests in petroleum and natural gas properties, and assets related thereto. Penn West Petroleum Ltd. (PWPL) is actively engaged in the business of oil and natural gas exploitation, development, acquisition and production in Canada. The Trust is the sole shareholder of PWPL. The Trust is a party to NPI Agreements with PWPL and certain other operating entities pursuant to which the Company has the right to receive the NPIs on petroleum and natural gas rights held by PWPL and the other operating entities from time to time. The Trust's production and reserves are attributed to more than 200 producing properties.

SIR Royalty Income Fund is an investment trust. The trademarks related to the SIR Corp. (SIR) concept restaurant brands, including Jack Astor's Bar and Grill, Alice Fazooli's! and Canyon Creek Chop House, and SIR's signature restaurant brands, including reds, Far Niente/Soul of the Vine, Petit Four, and the Loose Moose Tap & Grill, is used by SIR under a license agreement with SIR Royalty Limited Partnership (the Partnership) in consideration for a Royalty, payable by SIR to the Partnership. As of December 31, 2007, SIR operated more than 40 Concept Restaurants and Signature Restaurants in Canada. The Fund receives distribution income from its investment in the Partnership and interest income from the SIR Loan. On January 1, 2007, three new SIR Restaurants were added to the Royalty pool in accordance with the License and Royalty Agreement. SIR owns 100% of all its Canadian restaurants, except for Jack Astor's Don Mills Limited (50%).

K-Bro Linen Income Fund
is an open-ended, limited-purpose trust based in Canada. The Fund was created for the purpose of acquiring, directly or indirectly, all of the issued and outstanding securities of K-Bro Linen Systems Inc. (K-Bro). K-Bro owns and operates laundry and linen processing facilities in Canada. It provides a range of services to healthcare institutions, hotels and other commercial accounts. These services include the processing, management and distribution of linen, including sheets, blankets, towels, operating room linen and a variety of other types of linen. Its healthcare customers include hospitals and long-term care facilities. As of December 31, 2006, K-Bro owned and operated processing facilities from leased premises in six Canadian cities, including Toronto, Edmonton, Calgary, Vancouver, Victoria and Quebec City. K-Bro owns 100% of the shares of K-Bro Linen Inc. and is a 99% limited partner in KBL limited Partnership.

Disclaimer: I currently have no position in any of these but I am looking for an entry.

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