Good News For Canroys?
I’m a big fan of Canadian Royalty Trusts, also called Canadian Income Trusts or Canroys. But lately, they have been under a lot of selling pressure. Coupled with the sell-off in global equities is the overhanging tax change that the Canadian government implemented last year. According to the change, canroys will lose their tax-exempt status and from 2011 there will be the usual double taxation that affects most companies (except for US REITs).
Accordingly, the share prices of most canroys have dropped considerably from their peaks and their valuations have become quite attractive at these levels. But there’s some good news for canroys.
Growing discontent with the ruling Conservative party has created a situation where the Labor party might come into power. The Labor party has promising to either extend that conversion deadline to 2017 or to significantly decrease the trusts’ post-2011 tax rate. Either of these would represent huge positives for the trusts. This strange situation of the liberals becoming energy trust saviors has even encouraged many life-long conservatives from the Albertan energy patch to help bring down the current Conservative government.
If this becomes a reality, canroys should see renewed interest and a spike in the share prices. Lets see how it plays out. Till then, I’m happy to keep collecting my dividends!
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February 8th, 2008 at 6:56 pm
I’ve been accumulating the Canroys & the AmRoys for the last four months in a dividend portfolio. I was lucky enough to catch only the last 3 to 5 percent of the decline in share price reap the steady income stream they produce. I’m still dollar cost averaging in to about six different trusts and when I feel valuations get a little extended I’ll sell calls against my positions (out of the money) in order to attempt to generate some short term income (no more than three months on the contract) and cushion from a price decline. The buy-write strategy seems to be appropriate for the time being and the returns have been stellar since the equity market has been in a free fall since roughly October 07. I currently own PWE, ERF, PGH & PVX on the Canadian side and PBT & SBR on the American side. Any other higher quality names anyone cares to share I would appreciate it. I enjoy the website and look forward to many more informative posts and topics of passive income generation.
February 9th, 2008 at 12:26 am
the canadian ones you have are very good. don’t know much about SBR.
I also like AAV (bastards keep dropping their dividend but on the bright side its utilized towards increasing reserves) and HTE.
February 28th, 2008 at 9:09 pm
Just a quick note, and I’m sure most of you have been utilizing this strategy lately when purchasing new Canroy or Amroy shares. I have found that selling some out of the money upside calls while purchasing new shares/units has been a great strategy. Not only do I add a ‘built in’ dividend when selling the upside calls, but I also get the great monthly income stream. I have been trying to sell about three months out on each contract as I acquire new blocks of shares. If I get called out, so be it, I collect the dividend in the meantime and collect the upside margin as a capital gain. I want to own them anyway for the income, so I figured why not try to create another income stream off of the same asset. Just my two cents. Good luck all, and I continue to enjoy the informative discussion and posts regarding a variety of topics on this website.
March 12th, 2008 at 12:27 pm
Can you point to a place to see research on Canroys? I’ve been looking in the research area from my online broker, but the information is always incomplete. That, and the looming tax change (31%?!) makes it hard for me to buy, although the idea seems attractive. Do you have any updated information?
March 12th, 2008 at 1:02 pm
for research on canroys you can check out the following sites;
wikipedia
Yahoo! Finance <- check out the news under individual stocks like AAV, PGH, HTE, PWE, ERF