Hi Erryl, Norbert, Chang, DPK50...

 Happy New year.  I was wondering if purchasing Canroys in a taxable fund make sense instead of CDs or MMF...  I don't know much about them except that they pay a hefty dividend. PGH or ERF are the ones I was looking at. Any others to consider?

Can somebody explain to me what is good or what is bad about them,...or refer to a good explanation of it.Do you recommend that they be purchased in a sheltered account instead because of tax implications....

By the way, I thanks a bunch.did establish a position in TRAMX after reading all the positive comments... 

thanks

2learn

There is a new tax that is scheduled to go into effect in a few years.  At that time, many CanRoys will cease to make economic sense or at least will pay much reduced dividends.  How they will change (consoldiate, convert to corporations, get bought up, etc) adds a lot of risk to the purchase.

What's bad about them is that few Americans have not lost money after purchasing them.

Some reading material here: http://www.dividenddetective.com/canadian_royalty_trusts.htm .

erryl

 

There are some good canroys out there still, in my opinion, but this isn't something you should be looking into if you "don't really know much about them".  If all you know about canroys is that they pay high dividends, then I think you'd be better off buying VGENX. 

Try to get DI and Anil to answer your question.  I can't help you on this.

This should be a sleeper for some of you. I stumbled across RSGUF while looking at CANROYs.  I liked it because sugar production isn't a depleting asset like the Canadian oil in the ground -- so the dividend should be good indefinitely.  I also figured it should go up in sympathy with the recent general rise in agriculture. So much for theory.

    M* makes no mention of a dividend. Neither does Yahoo, but my trusty Merrill L broker site indicates a 10.25% yield.  Independent published information seems very scarce, so I only bought a very small amount.  Lately the stock rolled right off the table.

    Does anyone have any insight?
 

I managed to lose some serious money in CanRoy's... not long after I had sold the last of my holdings, I inherited some trusts from my father's estate that are made up of CanRoy's.  These were (way) down so I decided to hold onto them for awhile hoping they would come back.  For the last 3 months, they have been going up pretty steadily.  The largest holding in these trusts is PWE, which is up 26% in the last 3 months.  I plan to sell these trusts by the end of the year, because they are a tax pain in the fanny (often send tax form corrections in April after I would like to have filed my taxes). 

There is a tax change to take place in a couple years that will tax these trusts like corporations.  This will put a BIG hurt on the dividends.  Many of these Canroy trusts are consolidating and will probably eventually convert to corporations.  The ones that have done it so far have created a big hurt for shareholders.

If you are thinking of something like this, I would instead buy a US master limited partnerships... like KMP.  The yields may not be quite as high, but they are a lot more sustainable.   The MLP's are fairly tax friendly...

erryl

 

 

I owned PWE for a year and 1/2 or so.  Right after I bought it, Canada announced the new tax program for these type of stocks, so I had an instant loss.  I held it in an IRA, which sheltered the dividends, but did not allow me too take credit on my tax return for the foreign taxes deducted from my dividend.  As noted, these have has a little run up in 2008, and when I just about broke even, I sold the thing.  The yield is tempting, but given the new tax structure coming, I would view them as fairly speculative.  Not what I wanted.

Bob K.

I added to my canroy holdings in December of last year when a lot of them were selling for quite low prices.  Since then they've been on a huge run this year.  One of my holdings has gone from having around a 12% dividend to having an 8% dividend due to the price run-up, so I would say canroys are not nearly as attractive as they were a few months ago. 

I've already lightened up my holdings once this year, but I am thinking of doing so again.  I'm not sure if I will sell or not, but I am reinvesting dividends elsewhere (outside of the energy sector).  If you don't already own canroys at this point I'm not sure you necessarily should rush to buy.