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The other night on BNN Kevin O'Leary said that the Canadian Oil Sands conversion to a corporation spells the end for Trusts...
What does this mean for companies like Timber West Forest or Yellow Pages which have Yields of over 20%? (31% for Timber West)
What will happen to these trusts when they are converted over the next year and a half? Will the yield drop and the share price rise?

 

[lb71]

The yield will drop. The price of the stock most likely already reflects the change in tax rules, so it should not change much. Not sure why you would expect the price to rise. REITs are still allowed under the new rules.

 

[takingprofits]

The recent history of trusts that have already converted shows that the yield may drop a lot more than you may think as the new company may now need to conserve capital in order to actively grow.

The switch can really be one from a low growth model where most cash is paid out to unit holders to a typical business model where cash is retained and used to grow.

When the yield drops in such cases - so does the stock price - which is not good if you are holding the stock!

I would expect business trusts to be the most risky and having already been burned once am avoiding being burned again.

 

[Rox]

The recent history of trusts that have already converted shows that the yield may drop a lot more than you may think as the new company may now need to conserve capital in order to actively grow.

The switch can really be one from a low growth model where most cash is paid out to unit holders to a typical business model where cash is retained and used to grow.

When the yield drops in such cases - so does the stock price - which is not good if you are holding the stock!

I would expect business trusts to be the most risky and having already been burned once am avoiding being burned again.

Yeah, be careful here,... when the payout drops, normally the stock price will drop too as investors run away to other better counters.

 

[FrugalTrader]

As mentioned, the yield will drop due to corporations having to pay out dividends with after tax earnings. However, even though the yield will be lower, the distributions will be eligible dividends (instead of interest) , thus tax efficient for the investor.

 

[humble_pie]

time's running out, rox. Today is Hallowe'en in canada. It's morning in this country. All the kids have their costumes ready to go out trick-or-treating tonight. As soon as they get home, usually long before midnight our time, all the masks will come off.

for you though, it looks like november 1st in an hour or 2. You've got less than 100 minutes of disguises left.

boo !!

ps to frugal: (s)he's offshore. No dividend tax credits. Re tonight: i'm going out dressed as sherlock holmes. Or maybe i'll try agatha christie. How's your costume shaping up.

 

[Greyhound86]

Not all trusts saw their share price go down when they converted nor did all reduce their distribution/dividend.

Look at CPG, VET, PPL

 

[FrugalTrader]

ps to frugal: (s)he's offshore. No dividend tax credits. Re tonight: i'm going out dressed as sherlock holmes. Or maybe i'll try agatha christie. How's your costume shaping up.

I'm thinking Gordon Gekko.

 

[HaroldCrump]

Or maybe i'll try agatha christie.

As she would have told you, "humble" and "Hercule" don't go together

 

[davext]

I wouldn't be surprised if the price drops and the distribution drops. I don't believe that that the conversation is already priced in completely.

 

[Rox]

Thanks a lot, guys,... Happy Halloween to you,...

 

[Eclectic12]

The yield will drop. The price of the stock most likely already reflects the change in tax rules, so it should not change much. Not sure why you would expect the price to rise. REITs are still allowed under the new rules.

Maybe ... maybe not ... I suspect this is on a case-by-case basis. For example, some have indicated they don't plan on cutting their payouts (will be dividends post-conversion to a company) as they have "a couple of years of unused tax pools".

Those who are not aware of the tax pools may drive up the price, until the tax pool is used up. Then it's likely a dividend cut and drop in share price.

 

[alphatrader2000]

The other night on BNN Kevin O'Leary said that the Canadian Oil Sands conversion to a corporation spells the end for Trusts...
What does this mean for companies like Timber West Forest or Yellow Pages which have Yields of over 20%? (31% for Timber West)
What will happen to these trusts when they are converted over the next year and a half? Will the yield drop and the share price rise?

What is the "other night"? 2009. I havent seen that guy for ages on BNN

 

[onomatopoeia]

What is the "other night"? 2009. I havent seen that guy for ages on BNN

the first post was from....2009...