Canadian Royalty Energy Trusts Get Whacked Because of New Tax

Canadian royalty energy trusts, popular high-yield investments among income investors, declined in price after the Canadian government unexpectedly announced a new tax on cash distributions generated by the trusts. Starting in four years shareholders of existing trusts will pay up to 25 percent on cash distributions. Shareholders of trusts created after the November 1, 2006 announcement will pay the new tax rate starting in 2007.

Since the announcement prices have fallen over 20 percent for well-known energy trusts including Baytex Energy (BTE), Canetic Resources (CNE) and Penn West Energy (PWE).

As prices fall, yields will go up making the trusts tempting to some income investors. But buying on the price downside is always tricky so beware. Also, before you buy a trust at a marked down price, check with your tax advisor.

Related Articles:

Canadian Energy Trusts Decline as Oil Falls
Canadian Royalty Trusts Pay High Dividends
buyupside.com Articles About the Price Downside

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Posted November 10, 2006.