I have never been an Income Trust fan. I think it is a decent structure for companies in the energy sector, and for real estate. However, considering the energy sector has been so hot for so long, and is only now coming under pressure as the risk and supply premium are being flushed out, I cannot see how these trust can continue to pay out those high yields on 85%+ payout ratios. Business Trusts for the most part do not work that well. Notwithstanding the huge tax saving the companies enjoy, and the initial 20% pop in share value, these structures are not condusive to building long-term growth in shareholder value.
What i would like to see is not so much a change in tax laws for income trusts, but more favourable tax treatment of dividends and capital gains on shares. This will diminish the attractiveness for businesses to convert to trusts. And this is already happening.
A word of caution, do not get overly concentrated in one particular sector of the market, or one particular type of investment.
Consider Large-Cap Internationally diverse companies that pay dividends, and have a great history of increasing their dividends more than 5% per year. Then narrow that list to those companies that are cheap relative to their peers/industry. You'll find that some companies actually double their dividend payouts every 5 year period. This is true wealth building, and a surefire way to outpace inflation... don't walkaway from the 2-3% dividend yield without checking the history of dividend increases. Yield is just a measure of payment dividend by share price... guess what... share prices go up when dividends go up, so the 2 to 3% yield seems steady, but you will get a 10% increase in earnings each year. Interested?
