6 Canada Energy Trusts on Real Growth Trend

Canadian Income Trusts are in a good position to make money for investors after adjusting to the Halloween Betrayal of 2006, the Alberta royalty overreach of 2007 and the global financial follies of 2008. Each of the six stocks in our coverage is in an upward fundamental volume trend per unit adjusted for debt reduction and high income distributions (see chart Volume per Unit, below). The adjustment casts the trusts in a better light when reported volume is divided by adjusted units that have been declining for most of the trusts (see chart Units Outstanding, Adjusted, below). Bumps in the trend prior to the market peak last year reflect acquisitions.

The three largest conventional trusts acted as consolidators of smaller trusts in the face of changing trust taxation in 2011. Now those trusts are focused on reinvesting more cash flow. Considering our latest comparative analysis, Enerplus Resources Fund (ERF) retains a low McDep Ratio of 0.79 after we reduce estimated Net Present Value (NPV) to US$32 from US$36 a unit.
The largest income stock, Canadian Oil Sands Trust (COSWF.PK), has our buy rating, while the other five also offer attractive appreciation potential indicated by low McDep Ratios.