What is the difference between trust units and common shares. am considering canadian oil sands cos.un?

Question

this thing has a great dividend ? payout of over ten percent. what gives with that?

Answer 1

Right now, trusts, if they pay out their profits, pay virtually no income tax.

There are 3 issues here.  Oil and gas investments recently have had a rocky ride.  This applies to both shares and trust units.

Trusts to attract investment often pay out more than is sustainable or reasonable in the long run.  An extractive industry such as oil and gas has to invest in properties, exploration or infrastructure to stay alive in the long run. Some have not and are reducing pay-outs big-time which means their prices plummet  Conversely they might have to go the market at the worst time to raise either debt or capital  So a large dividend payout might repeat might mean their shares are set for a dive.

Thirdly, the law is set to change in 2011 which will force most trusts to reorganize as corporations.  What this will mean to unit prices and pay-outs can and will vary wildly from company to company..

So if you bought units at $47.50 today and 3 years from now the stock is trading at $30. even if it has continued to pay the large dividend you might ask yourself if you have actually had a 10 per cent return or are they just giving you your own money back?