Comments on: How To Pick Pipeline Trusts http://financialjungle.com/2007/07/16/investing/how-to-pick-pipeline-trusts/ A Vancouverite's journey to financial freedom. Fri, 21 Nov 2008 22:53:59 +0000 http://wordpress.org/?v=2.1.2 By: moneygardener (AKA investor99) http://financialjungle.com/2007/07/16/investing/how-to-pick-pipeline-trusts/#comment-451 moneygardener (AKA investor99) Mon, 16 Jul 2007 15:40:30 +0000 http://financialjungle.com/2007/07/16/investing/how-to-pick-pipeline-trusts/#comment-451 Good post. One point I would argue is that it is crucial to buy these when they are cheap, as compared with common stocks. The fact that distributions are paid monthly plays into the 'bird in the hand' theory IMO. For example: IPL.UN is yielding, lets say 9% So each month you wait to invest $5,000, you are essentially missing out on $37.50, assuming your cash is not earning interest while it waits. Wait 6 months in the hopes that the trust will drop in price, and you've just missed out on $225, while the drop in price that you were waiting for is far from certain. Good post.

One point I would argue is that it is crucial to buy these when they are cheap, as compared with common stocks. The fact that distributions are paid monthly plays into the ‘bird in the hand’ theory IMO.

For example:

IPL.UN is yielding, lets say 9%

So each month you wait to invest $5,000, you are essentially missing out on $37.50, assuming your cash is not earning interest while it waits.

Wait 6 months in the hopes that the trust will drop in price, and you’ve just missed out on $225, while the drop in price that you were waiting for is far from certain.

]]> By: moneygardener (AKA investor99) http://financialjungle.com/2007/07/16/investing/how-to-pick-pipeline-trusts/#comment-452 moneygardener (AKA investor99) Mon, 16 Jul 2007 15:52:58 +0000 http://financialjungle.com/2007/07/16/investing/how-to-pick-pipeline-trusts/#comment-452 Forgot to mention, according to S&P Inter was actually a SR-3 before it was removed recently, I believe by Inter's request. Forgot to mention, according to S&P Inter was actually a SR-3 before it was removed recently, I believe by Inter’s request.

]]> By: Financial Jungle Guy http://financialjungle.com/2007/07/16/investing/how-to-pick-pipeline-trusts/#comment-453 Financial Jungle Guy Mon, 16 Jul 2007 16:05:25 +0000 http://financialjungle.com/2007/07/16/investing/how-to-pick-pipeline-trusts/#comment-453 It depends on your opportunity cost. If you're earning 4% elsewhere, then it's still worth the wait. It depends on your opportunity cost. If you’re earning 4% elsewhere, then it’s still worth the wait.

]]> By: moneygardener (AKA investor99) http://financialjungle.com/2007/07/16/investing/how-to-pick-pipeline-trusts/#comment-454 moneygardener (AKA investor99) Mon, 16 Jul 2007 17:18:46 +0000 http://financialjungle.com/2007/07/16/investing/how-to-pick-pipeline-trusts/#comment-454 Maybe, maybe not. Price fluctuations are extremely hard to predict. When is it cheap? When is it expensive? Whereas distributions are more predictable and stable. Maybe, maybe not.

Price fluctuations are extremely hard to predict. When is it cheap? When is it expensive? Whereas distributions are more predictable and stable.

]]> By: Nabloid.com http://financialjungle.com/2007/07/16/investing/how-to-pick-pipeline-trusts/#comment-455 Nabloid.com Mon, 16 Jul 2007 19:56:47 +0000 http://financialjungle.com/2007/07/16/investing/how-to-pick-pipeline-trusts/#comment-455 I like the idea of pipeline trusts, but what happens when the income trusts are finally abolished? What will the dividend yield look like then? I like the idea of pipeline trusts, but what happens when the income trusts are finally abolished? What will the dividend yield look like then?

]]> By: Financial Jungle Guy http://financialjungle.com/2007/07/16/investing/how-to-pick-pipeline-trusts/#comment-458 Financial Jungle Guy Tue, 17 Jul 2007 06:03:58 +0000 http://financialjungle.com/2007/07/16/investing/how-to-pick-pipeline-trusts/#comment-458 Most pipeline trusts will probably skimp on distributions to pay corporate taxes. Note that this is already priced into the shares; your risk appetite is remunerated with higher yields. This will hurt RRSP unitholders the most, but I have a strategy. My own RRSP is partly stuffed with income trusts: Yellow Pages, North West Company, Parkland Income Fund, and CML Healthcare. By 2011, I'll move them to my non-registered account to take advantage of the dividend-tax credits. Most pipeline trusts will probably skimp on distributions to pay corporate taxes. Note that this is already priced into the shares; your risk appetite is remunerated with higher yields.

This will hurt RRSP unitholders the most, but I have a strategy. My own RRSP is partly stuffed with income trusts: Yellow Pages, North West Company, Parkland Income Fund, and CML Healthcare. By 2011, I’ll move them to my non-registered account to take advantage of the dividend-tax credits.

]]> By: Nabloid.com http://financialjungle.com/2007/07/16/investing/how-to-pick-pipeline-trusts/#comment-460 Nabloid.com Tue, 17 Jul 2007 21:41:42 +0000 http://financialjungle.com/2007/07/16/investing/how-to-pick-pipeline-trusts/#comment-460 I made the mistake of having way too much of a portfolio in Income Trusts. I did very well with them over a two year period (prior to the death warrant). Some of them doubled while giving out 10 to 14% dividends! I agree, some of the future implications are priced into the stocks, but it isn't too accurate because no one seems to know which companies will continue issuing lots of dividends, and which companies will decide to go the traditional 2 to 4% div. yield route... As a result, I think there are a lot of opportunities within the Income Trust sector and that is why so many private equity firms are looking at making acquisitions (Versacold). Should be an interesting time, I just hope we still have plenty of high yield companies to choose from. It's one of the keys to my retirement strategy... I made the mistake of having way too much of a portfolio in Income Trusts. I did very well with them over a two year period (prior to the death warrant). Some of them doubled while giving out 10 to 14% dividends!

I agree, some of the future implications are priced into the stocks, but it isn’t too accurate because no one seems to know which companies will continue issuing lots of dividends, and which companies will decide to go the traditional 2 to 4% div. yield route… As a result, I think there are a lot of opportunities within the Income Trust sector and that is why so many private equity firms are looking at making acquisitions (Versacold). Should be an interesting time, I just hope we still have plenty of high yield companies to choose from. It’s one of the keys to my retirement strategy…

]]> By: Financial Jungle - » Bought Inter Pipeline Fund And Boston Pizza Royalty Income Fund http://financialjungle.com/2007/07/16/investing/how-to-pick-pipeline-trusts/#comment-505 Financial Jungle - » Bought Inter Pipeline Fund And Boston Pizza Royalty Income Fund Thu, 02 Aug 2007 16:36:26 +0000 http://financialjungle.com/2007/07/16/investing/how-to-pick-pipeline-trusts/#comment-505 [...] can read about Inter Pipeline in my How To Pick Pipeline Trusts post, where I highlighted their key assets as well as their strong and growing free cash flow. [...] […] can read about Inter Pipeline in my How To Pick Pipeline Trusts post, where I highlighted their key assets as well as their strong and growing free cash flow. […]

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