Saturday, September 19, 2009

Investing in Canadian Royalty Trusts (Canroys)

I have canroys in my portfolio. Canroys are basically Canadian Royalty Trusts (CanRoys) and usually own oil and gas fields. Canroys receive tax advantages that allows them to distribute quite a lot of money to their shareholders monthly so as to avoid paying corporate taxes. In Canada, canroys often feature in people's portfolio especially if they are looking for high dividend yield stocks.

However, it seems that there will be certain changes to the legislation pretty soon. The Canadian government will change the laws in 2011 to make existing canroys pay taxes at the same rate as that of corporations. Without the tax incentives to pay out dividends, the yield from canroys are set to drop to levels around 2 to 4% (in line with those of corporations). During the recent economic crisis of 2008, canroys prices dropped due to the announcement of the proposed tax changes in Canada.

In Singapore, you can invest in canroys as long as you have a US stock trading account. Canroys and similar stocks that can be found on the US stock exchange include the following:
  • Penn West Energy Trust
  • Pengrowth Energy Trust
  • Enterra Energy Trust
  • Baytex Energy Trust
  • Enerplus Resources Fund
  • Provident Energy Trust
  • TransGlobe Energy Corp
  • Nexen Inc
  • Compton Petroleum Corp
  • EnCana Corporation

The monthly dividends that canroys distribute will then be sent to you through mail via a cheque. Do note however there there are charges that include withholding tax (15%), postage/handling charge ($5) and 7%GST. For the month of September 09, I just received a cheque for $9.94

I currently own Penn West Energy Trust (PWE). Used to own Pengrowth Energy Trust but sold it and consolidated all my holdings of canroys under PWE.

SEE RELATED POSTS:

Read : The 25% Cash Machine

Read: Dividends I have Received Thus Far

2 comments:

  1. Do u think CRT are still worth investing in? Given the new tax rules and such?

    ReplyDelete
  2. It depends on your risk appetite.

    I feel that prices are pretty depressed right now as they already reflect the bad news.

    The yield might be attractive if one is willing to take the risk

    ReplyDelete

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