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Income Trust Picks for my TFSA

Thursday, August 6, 2009

Income Trust Picks for my TFSA

If you read the last post than you should know why I believe Income Trusts are the best investments to put into your TFSA currently. After some intensive research I have come up with a list that I believe would be great additions. The only issue I am currently having is that I believe the TSX and all Canadian Stocks are due for a serious correction so I will need to figure out a time line for before I make my entrance.
My search for Income Trusts to add to my TFSA led me to 6 that I will now list in order of my top to bottom choices: aw.un, wte.un, liq.un, cfx.un, ylo.un, brk.un .
AW.UN (A & W Revenue Royalties Income Fund)
I came across this one by chance, but found it to be a great investment opportunity. The reasons why I like this one are as follows: Thompson Reuters gave the fund an overall ranking of 9/10 in their latest analyst report, the Dividend yield is currently 9.62%, people buy more burgers during a recession, and after the recession people will be more conscious of their spending and continue to eat relatively cheap food. My only real concern at this point is that the current price at $13.72 is less than $1 from the 52 week high.
WTE.UN (Westshore Terminals Income Fund)
I have been looking at this Income Trust for over 6 months now and am very interested in owning it in my TFSA. The income stream from this fund is very easy to understand, which is a huge plus. The funds income comes from coal shipping. They are paid based on volume so the price of coal is not a huge issue for the fund providing less volatility than some of the coal producers. The dividend yield is strong at 8.74% currently and Thompson Reuters gave them a 10/10 on their latest analyst report. This one is still way off the 52 week high and the income should be stable for the next 2 quarters according to their latest press releases.
LIQ.UN (Liquor Stores Income Fund)
I have also been following this one for a while. The fund’s income stream comes from a number of liquor stores throughout Western Canada and there is growth potential for new additions here. The dividend is a healthy 12.79% and Thompson Reuters has ranked them at an 8/10 for some time now. This one is also still over $2 from the 52 week high.
CFX.UN (Canfor Pulp Income Fund)
Canfor is one of the strongest forestry companies around. The forestry sector has been in a major downturn for well over 5 years so the stocks have been demolished. Canfor has the benefit of being well capitalized compared to competitors and should make it though this recession even if it turns into a depression. The dividend yield is only 3.7%; however, there is so much upside potential in the distributions and in the stock that this one needs to be considered. Thompson Reuters also rated this one an 8/10.
YLO.UN (Yellow Pages Income Fund)
I have owned this before and would like to own it again. Many people feel the phone book business is dead but this company is so much more. Their online phone directory is used by millions of people everyday including myself and they are well diversified into many other online advertising types. They cut their dividend a couple of quarters ago yet the yield is still around 16%. It is near its 52 week low so I am liking this income trust again. Thompson Reuters gave them a 9/10 recently and the P/E is so low at 4.5. My only real concern is that they plan to convert back to common stock in 2010.
BRK.UN (The Brick Group Income Fund)
This one I am on the fence on. The recession has not been nice to furniture stores and that’s all the brick does. They have many different brands including ‘the Brick’, and ‘United Furniture Warehouse’. There is a ridiculous amount of upside here if the recession ends this year; however, if things continue like I think they might, this one may continue as a dog. Thompson Reuters gave them a 5/10 recently and there are currently no distributions. This one I would not risk in my TFSA but might buy in my main account.
The thing to remember about buying any investments is to think about it with reference to your entire portfolio. We don’t want to just gamble away our hard earned cash. I will discuss in my next post how to use position sizing and stops to distribute your portfolio affectively and discuss how I will do this with my TFSA positions.

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