In The News

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Trusted Returns
September 08, 2011

Income Trusts Didn't Disappear When The Government Eliminated Their Tax Advantage, But Most Changed Their Corporate Stripes. Can The Remaining Few Hold Out?

Michael Decter, the senior portfolio manager, CEO and president of LDIC, an independent investment counsel based in Toronto, thought someone was playing a Halloween prank on him when he first heard the news. As a long-time income-trust investor, he was first and foremost concerned about the impact the new tax would have on distributions. On that front, he needn't have worried too much. While some companies were forced to cut their payouts -- whether they remained a trust or converted to a corporation -- but many have been able to maintain their payouts, at least on an after-tax basis. Even if the payout falls 30%, it often works out to be a wash for any investor who qualifies for the dividend tax credit. "We have been pleasantly surprised," Decter says. "We have tried to situate ourselves in ones that had low sustainable payout ratios, but, even then, a lot have held up better than we would have originally thought."