Comments on: How much will they cut my income trust distribution by? http://www.thickenmywallet.com/blog/wp/2008/08/25/how-much-will-they-cut-my-income-trust-distribution-by/ Everything to do with thickening your wallet by entrepreneur turned President of an Investment Company Wed, 10 Mar 2010 15:31:00 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: Thicken My Wallet » Blog Archive » Will income trust conversions lead to yield chasing? http://www.thickenmywallet.com/blog/wp/2008/08/25/how-much-will-they-cut-my-income-trust-distribution-by/comment-page-1/#comment-20286 Thicken My Wallet » Blog Archive » Will income trust conversions lead to yield chasing? Tue, 19 Jan 2010 09:03:18 +0000 http://www.thickenmywallet.com/blog/wp/?p=351#comment-20286 [...] of a 31.5% tax on previously tax exempt Canadian issued income trust would force many income trusts to convert to corporations before January 1, 2011 (the day the new tax regime is effective) and lead to distribution cuts in [...] [...] of a 31.5% tax on previously tax exempt Canadian issued income trust would force many income trusts to convert to corporations before January 1, 2011 (the day the new tax regime is effective) and lead to distribution cuts in [...]

]]> By: NelpfoopleMab http://www.thickenmywallet.com/blog/wp/2008/08/25/how-much-will-they-cut-my-income-trust-distribution-by/comment-page-1/#comment-19855 NelpfoopleMab Wed, 04 Nov 2009 17:51:53 +0000 http://www.thickenmywallet.com/blog/wp/?p=351#comment-19855 Recently, there has been a great deal of investigation by the FTC against blogs and website developers for not revealing their advertising revenue, or existing connections with advertising agencies. What are your personal thoughts about how this could hurt the blog community? Recently, there has been a great deal of investigation by the
FTC against blogs and website developers
for not revealing their advertising revenue, or existing
connections with advertising agencies.

What are your personal thoughts about how this could hurt
the blog community?

]]> By: A Lap Of The Blogs : WhereDoesAllMyMoneyGo.com http://www.thickenmywallet.com/blog/wp/2008/08/25/how-much-will-they-cut-my-income-trust-distribution-by/comment-page-1/#comment-16603 A Lap Of The Blogs : WhereDoesAllMyMoneyGo.com Fri, 29 Aug 2008 02:35:40 +0000 http://www.thickenmywallet.com/blog/wp/?p=351#comment-16603 [...] Thicken My Wallet writes about the upcoming changes to income trust taxation and what it could mean for your distributions. [...] [...] Thicken My Wallet writes about the upcoming changes to income trust taxation and what it could mean for your distributions. [...]

]]> By: Canadian Capitalist http://www.thickenmywallet.com/blog/wp/2008/08/25/how-much-will-they-cut-my-income-trust-distribution-by/comment-page-1/#comment-16571 Canadian Capitalist Tue, 26 Aug 2008 17:41:22 +0000 http://www.thickenmywallet.com/blog/wp/?p=351#comment-16571 Thanks for the link. As YLO is one of my handful of holdings, my guess is that it is one of the few holdings that is likely to maintain its payout. As Potato points out, their payout ratio is already in the 80% range (78% in the latest quarter) and they seem to be on track to bring it down to 70% range fairly easily. MG: I don't find it unbelievable that YLO is sporting such a juicy yield. P/E on comparable businesses (mostly in the US) is down to 7.5 or an earnings yield of 13.33%. YLO pays out all its earnings, so the earnings yield is slightly lower. I personally think it is a good business, that's why I'm holding it. Thanks for the link.

As YLO is one of my handful of holdings, my guess is that it is one of the few holdings that is likely to maintain its payout. As Potato points out, their payout ratio is already in the 80% range (78% in the latest quarter) and they seem to be on track to bring it down to 70% range fairly easily.

MG: I don’t find it unbelievable that YLO is sporting such a juicy yield. P/E on comparable businesses (mostly in the US) is down to 7.5 or an earnings yield of 13.33%. YLO pays out all its earnings, so the earnings yield is slightly lower. I personally think it is a good business, that’s why I’m holding it.

]]> By: David http://www.thickenmywallet.com/blog/wp/2008/08/25/how-much-will-they-cut-my-income-trust-distribution-by/comment-page-1/#comment-16563 David Tue, 26 Aug 2008 02:02:40 +0000 http://www.thickenmywallet.com/blog/wp/?p=351#comment-16563 Great post, I've just gotten into this investing thing, and YLO is my first foray. I appreciate your comments MG (& Potato). Thanks! Great post, I’ve just gotten into this investing thing, and YLO is my first foray. I appreciate your comments MG (& Potato). Thanks!

]]> By: Potato http://www.thickenmywallet.com/blog/wp/2008/08/25/how-much-will-they-cut-my-income-trust-distribution-by/comment-page-1/#comment-16562 Potato Tue, 26 Aug 2008 00:58:46 +0000 http://www.thickenmywallet.com/blog/wp/?p=351#comment-16562 MG, that's my understanding as well... Right now, YLO is paying out $1.17/unit per year and estimated to make $1.45/unit per year (DCPU 2008E), for a payout ratio of about 81%. So for 2011, they're hoping to still pay out $1.17 and make ~$1.67 pre-tax so that they still have $1.17/unit after-tax (pre-tax payout ratio of ~70%, after-tax payout ratio of ~100%). Between now and then they have to increase their revenues/cash flow by about 15%, or about 4-5% per year. MG, that’s my understanding as well…

Right now, YLO is paying out $1.17/unit per year and estimated to make $1.45/unit per year (DCPU 2008E), for a payout ratio of about 81%. So for 2011, they’re hoping to still pay out $1.17 and make ~$1.67 pre-tax so that they still have $1.17/unit after-tax (pre-tax payout ratio of ~70%, after-tax payout ratio of ~100%). Between now and then they have to increase their revenues/cash flow by about 15%, or about 4-5% per year.

]]> By: moneygardener http://www.thickenmywallet.com/blog/wp/2008/08/25/how-much-will-they-cut-my-income-trust-distribution-by/comment-page-1/#comment-16561 moneygardener Mon, 25 Aug 2008 23:59:13 +0000 http://www.thickenmywallet.com/blog/wp/?p=351#comment-16561 I don't make the same assumption as you do based on that. The way I understand it is that by 2011 their pay out ratio will be down to a point (low 70% range) where they will be able to pay the same distribution as they did in 2010 while paying the new tax rate. They have given investors no reason to think that they can not pull this off. It almost seems to good to be true though; that a Canadian company can be bought today at an eventual 12% dividend yield rate on cost. I don’t make the same assumption as you do based on that. The way I understand it is that by 2011 their pay out ratio will be down to a point (low 70% range) where they will be able to pay the same distribution as they did in 2010 while paying the new tax rate. They have given investors no reason to think that they can not pull this off. It almost seems to good to be true though; that a Canadian company can be bought today at an eventual 12% dividend yield rate on cost.

]]> By: admin http://www.thickenmywallet.com/blog/wp/2008/08/25/how-much-will-they-cut-my-income-trust-distribution-by/comment-page-1/#comment-16560 admin Mon, 25 Aug 2008 20:51:35 +0000 http://www.thickenmywallet.com/blog/wp/?p=351#comment-16560 Thanks. The way I read this release then is that YPG can set out to maintain the cash distribution (hard cash and not the yield) as you do. The assumption is that their cash flow from operations can increase at no less than a 31.5% clip by 2011 (in reality more to factor inflation). If they falter between now and then, then all bets are off. That is a very aggressive cash flow growth strategy. You know the stock better than I do, do you think it can be done? Thanks. The way I read this release then is that YPG can set out to maintain the cash distribution (hard cash and not the yield) as you do. The assumption is that their cash flow from operations can increase at no less than a 31.5% clip by 2011 (in reality more to factor inflation). If they falter between now and then, then all bets are off. That is a very aggressive cash flow growth strategy. You know the stock better than I do, do you think it can be done?

]]> By: moneygardener http://www.thickenmywallet.com/blog/wp/2008/08/25/how-much-will-they-cut-my-income-trust-distribution-by/comment-page-1/#comment-16559 moneygardener Mon, 25 Aug 2008 20:19:57 +0000 http://www.thickenmywallet.com/blog/wp/?p=351#comment-16559 I agree that the quote I attached was not the best, and I apologize for that. Here is a better version: We intend to continue to increase cash distributions during the transition period, but at a more moderate pace than in the past. With Distributable Cash per unit expected to grow at sustainable growth rates in excess of cash distributions, the payout ratio is expected to decline to the low 70% range by 2010, which will provide the necessary flexibility to fund cash taxes starting in 2011. Our objective is to be in a position to maintain the 2010 level of cash distributions to our shareholders in 2011, after a conversion to a corporate structure, despite the cash taxes that will then be payable by YPG. These distributions will then be treated as dividends, providing an additional advantage to taxable investors. Therefore, our ability to generate growing free cash flow from operations will provide the necessary flexibility to fund cash income taxes, which will position us well for a successful transition from an income trust to a corporation on or about December 31, 2010. Distribution turns into a dividend after December 31, 2008. Currently yielding 12%. No bones about it, they are saying that their objective is to change distributions into dividends and proceed post 2011 without ever cutting. I agree that the quote I attached was not the best, and I apologize for that. Here is a better version:

We intend to continue to increase cash distributions during the transition period, but at a more moderate pace than in the past. With Distributable Cash per unit expected to grow at sustainable growth rates in excess of cash distributions, the payout ratio is expected to decline to the low 70% range by 2010, which will provide the necessary flexibility to fund cash taxes starting in 2011.

Our objective is to be in a position to maintain the 2010 level of cash distributions to our shareholders in 2011, after a conversion to a corporate structure, despite the cash taxes that will then be payable by YPG. These distributions will then be treated as dividends, providing an additional advantage to taxable investors. Therefore, our ability to generate growing free cash flow from operations will provide the necessary flexibility to fund cash income taxes, which will position us well for a successful transition from an income trust to a corporation on or about December 31, 2010.

Distribution turns into a dividend after December 31, 2008. Currently yielding 12%. No bones about it, they are saying that their objective is to change distributions into dividends and proceed post 2011 without ever cutting.

]]> By: admin http://www.thickenmywallet.com/blog/wp/2008/08/25/how-much-will-they-cut-my-income-trust-distribution-by/comment-page-1/#comment-16558 admin Mon, 25 Aug 2008 19:27:46 +0000 http://www.thickenmywallet.com/blog/wp/?p=351#comment-16558 MG: I guess I am from Missouri. These trusts have to show me after they convert that they can maintain the distribution at current levels (not yield but hard cash). The YPG statement really says a lot without saying anything. It never commits to sustaining cash distributions AT CURRENT LEVELS. It only promises to sustain cash distributions so, technically, if they pay a dividend post conversion they have not made a false representation since the distribution is sustaining in that you are getting something. At what levels? They refuse to say (nor should they). Maybe I am being a lawyer and word-smithing but if I was YPG lawyer that's how I would defend the release if push came to shove. MG: I guess I am from Missouri. These trusts have to show me after they convert that they can maintain the distribution at current levels (not yield but hard cash).

The YPG statement really says a lot without saying anything. It never commits to sustaining cash distributions AT CURRENT LEVELS. It only promises to sustain cash distributions so, technically, if they pay a dividend post conversion they have not made a false representation since the distribution is sustaining in that you are getting something.

At what levels? They refuse to say (nor should they). Maybe I am being a lawyer and word-smithing but if I was YPG lawyer that’s how I would defend the release if push came to shove.

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