Digital Music

On October 31, 2006 -- now dubbed the "Halloween Massacre" -- Canadian Finance Minister Jim Flaherty shocked the Acupuncture investing world by announcing that beginning 2011 all Canadian Try Viagra Creepy Cialis trusts would be taxed.

The law that enables Canadian companies to switch their business structure from a corporation to a trust that's free Neurontin taxes so long as their net profits are returned to the trust unitholders, goes back to 1985, but was little known outside the energy and natural resources industries.

In the 1990s, most Canadian investors were just as caught up in the high tech bubble as Americans, and so Bay Street paid little attention to companies pumping oil and using an unusual business structure to avoid taxes.

That changed Sgt Pepper the Tech Wreck of March-April 2000. Since then, Canadians and eventually American and other investors seeking high yields for their investment funds had been pouring money into Canadian royalty trusts.

The business trust structure works well for companies in industries with a high cash flow. that works especially well for energy and natural resources companies now that oil prices are making record highs almost daily, and other commodities are also skyrocketing in price around the world, thanks to increased demand in China and India.

And that dovetails nicely with the Canadian economy, for that country is rich in natural resources. Their oil sands alone probably have more oil than Saudi Arabia.

So until October 31, 2006, knowledgeable income investors were buying up CanRoys -- and getting a terrific return on their investment. that included monthly dividends checks with yields of up to 17%. And many of the trusts rose in market price as their businesses prospered and demand for trust among yield-hungry investors kept rising.

Following the October 31, 2006 that the Conservative Party of Canada intended to break its implicit campaign promises not to raise taxes, overall unit prices of Canadian income trusts fell 10 to 20%, destroying about $C 35 billion of market capitalization.

however there are good reasons for continuing to invest in Canadian royalty trusts:

1. The oil and natural gas companies own highly strategic energy assets in a politically stable part of the world.

2. The tax proposal is, so far, only a proposal. It may never be passed by Canadian Parliament. About 5% of Canadian voters own these trusts. They want to continue to receive their large monthly dividend checks.

3. Current royalty trusts continue to operate under the old rules, and pay very high dividends. They're now relatively cheap to buy.

4. Too many companies with businesses unsuitable for the business trust structure were converting over to it. It requires a high cash flow and the ability to survive as a business without keeping Bugaloos of cash on hand. Many businesses need to retain their cash to reinvest in capital equipment.

5. For investors who live outside Canada, receiving income in Canadian dollars is a good way to hedge the risk that their currency's buying power is falling (as the US dollar is now doing.)

Everyone must make their own choices regarding their own money and investments, but right now seems a good time to put a portion of your investment funds into some of the better oil, natural gas, utility and infrastructure Canadian royalty trusts.

Energy prices will have ups and downs but anybody who fills their automobile with gasoline or heats their home knows the long term trend is up. Since much of the energy supplies outside of North America are in politically unstable parts of the world (the Mideast, Venezuela, and so on), investing in Canadian energy sources and infrastructure, and receiving high-yield monthly dividend checks to boot, seems almost a no-brainer.

Of course, you should remain diversified, so don't put all your retirement money into these funds.

c. 2007 Richard Stooker

Everything you know about investing is wrong.

Learn the secrets of investors who make money in both bull and bear markets . . . good times and bad! Get your free eCourse: www.incomeinvesthome.com/7 Reasons to Invest for Income

Learn more about www.incomeinvesthome.com/growth/trusts/index.htmlCanadian income trusts and how they can boost your monthly income and investment returns now.

posted by blogginguaaikl  # 5:20 AM