Whats Next for Canadian Income Trusts?
The uncertainty of what will happen next has weighed on trusts. Most will convert over to ordinary corporations, but which ones? Which will get taken over? Which will cut their payouts to conserve cash and focus on production growth? Which will keep paying dividends at the same rate? But now the clouds are starting to clear. According to Canadian investment dealer RBC Dominion, 72 income trusts have been acquired at an average premium of +14% above their trading price. Another 40 have converted to dividend-paying corporations. A recent survey by investor relations firm BarnesMcInerney and others showed that 84% of the 165 Canadian income trust CEOs polled expect to cut cash distributions when they convert trusts into traditional corporations. But all is not doom and gloom. Yes, some are cutting payments, but others are saying they will maintain the current rate if they have the cash flow. So in a search for what I call “high-yield keepers,” I’ve conducted my own study. At the conclusio
