'These trusts own or lease oil and gas rights and collect royalties from producers, which they then pay out directly to shareholders, not unlike real estate investment trusts. The payouts are considered qualified dividend income for U.S. investors and subject to the advantageous 15% tax rate. The Canadian government withholds 15%, but U.S. investors can claim an offsetting tax credit on their federal tax return. The dividends are only taxed when they're received as income by unit holders, not at the corporate level.
However, when Canadian Finance Minister Jim Flaherty announced the government's intention to tax these trusts on the corporate level beginning in 2011, these so called "Canroys" fell by 20% and more, and their yields swelled to over 16%. A number of brave advisers, including Forbes magazine fixed income columnist Richard Lehmann, editor of Forbes/Lehmann Income Securities Investor, decided that it was time to double down, reasoning that even if the higher tax rates were to pass, these energy-backed yield shares would still have yields of 8% to 12%. He has been buying more Canroys, and now it seems that Marketocracy's best-performing stock pickers are in agreement with Lehmann and are scooping up shares'
forbes.com |
