Canadian Energy Trusts

I recently received a newsletter touting Canadian Energy Trusts. The gist of the letter was that they will make great investments for 2010 because of the new tax law that goes in to effect in 2011. Due to the unfavorable change in Canadian tax law in regards to Canroys, as they are popularly called, several of these trusts are converting to taxable corporations. In so doing they have seen tremendous gains in share prices and some even continue to pay out most of their earnings to shareholders in the form of dividends. So you not only see capital appreciation, but continue to receive excellent dividend income.

My only current position in Canadian Energy Trusts consists of shares in Pengrowth Energy (PGH). Pengrowth Energy Trust. The Group's principal activity is to provide directly and indirectly explore for, develop and hold interests in petroleum and natural gas properties, through investments. The Group directly and indirectly acquires, owns and manages working interests and royalty interests in oil and natural gas properties. Its activities are financed by issuance of royalty units and interest bearing notes to the Trust and third party debt. With a current dividend yield of 8.30%, I added them to my portfolio for their monthly payout.

I've decided, given the new information on the conversions, I'll be adding more shares of PGH to my current investments. I don't know that they will actually convert to a taxable corporation, but I'd say the chances are good. If they choose to do so, it's likely they, like the other trusts who have already converted, will see appreciation in share prices. Either way, the boost to my monthly dividend income makes the purchase worthwhile.

Canadian Energy Trusts

I got out of Canadian Energy trusts last and at the first part of this year, as their share prices and the price of oil began to drop. However, now that share prices are down and appear to have stabilized, I thought they might be worth a second look.

Oil is expected to average above $73 in 2010, and with a recovery in the global economy, could go even higher. Which means the Canadian trusts would be in a good position to make money. I've decided to ease my way back in by buying shares of Pengrowth Energy Trust.

Pengrowth (PGH) currently has a dividend yield above 12% on their recent share price of $8.87. Their earnings are currently sufficient to maintain their dividend payout and I expect those earnings to go up. Of course Canada will take their share in taxes, but I do like the idea of another high dividend payer in my portfolio.