Canadian income trusts are similar to real estate investment trusts in that they regularly distribute the majority of profits to investors. Unlike Reits, there are different types of Canadian income trusts investing in a range of sectors. These include oil and gas royalty trusts, business income trusts investing in sectors, including power generation, and Reits.
The Middlefield Canadian income trust fund is a Jersey-based fund that aims to deliver a high level of income and preserve capital by investing indirectly in Canadian income trusts using derivatives.
The fund’s dividends for 2009 have been reduced to 1.25p for each share from 1.75p because the recent correction in oil and gas prices has led to several oil and gas royalty trusts reducing their dividends. The global economic slowdown has been another contributory factor because it has had a negative impact on company earnings.
Midas still sees the Middlefield fund as an attractive investment due to its future dividend prospects.
Oil and gas consultant Groppe Long & Littell is forecasting a recovery of energy prices later this year as interest rate cuts and other measures aimed at stimulating the global economy take effect. If this happens, investors in the Middlefield fund could reap the rewards.
Midas business development director David Thomas says: “The Middlefield fund is designed to deliver an attractive income stream – the yield is currently in the mid-teens. We see it as an example of the diverse source of funds from which we gather income for our balanced income fund.”