I stayed away from income trusts because tax rules can be changed instantly at the whim of the government.
Quite a few income trusts already converted to corporations
in the past 1-2 years. Off the top of my head these are some of the
recently converted ex-income-trusts: Ag growth,
Newalta, Crescent Point, Cathedral energy, Trinidad drilling etc.
A lot more conversions are going to follow for the rest of 2010.
By 2011 when the new tax rules are in place you won't see many income trusts to remain maybe except those that won't survive anyway.
Anyway, I thought that RESOURCE income trusts do eventually go to zero because an oil well is a depleting asset.
That may be the way it is with resource income trusts (or whatever it is called) in the
U.S. Oil and gas income trusts in Canada can, at least in principle, replace their depleting
reserves through acquisition of mature properties (usually financed by
equity unit offering at the cost of stock dilution). Depletion has been
a major concern and many of these trusts indeed run on a business model that is
not unlike a ponzi scheme. Nonetheless things have changed a lot in the world
of resource income trusts in the lately. Quite a few trusts have adopted
more sustainable business model that should allow them to continue to pay
out a nice dividend while maintaining some reserve growth for some years.
How long they will remain sustainable is anyone's guess. Canada's conventional oil reserve
has long passed its 50% depletion point. I will be surprised if any
oil-weighed income trust can maintain its (per stock unit) reserve for more than 10 years. It doesn't matter if all these resource trusts will go to
zero eventually as long as you can recoup your investment
from the cash distribution of your stock long before its death.
There are also long life resource trust like Labrador Iron Ore fund
for which the precise reserve life matters little.
I know many people will point to oil sands as the alternative to
investment into conventional oil&gas trusts. Personally I think Canadian
oil sand is one over-hyped and over-rated resource
and I stay away from oil sands producer
in my investment portfolio. But that is another issue.