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 Reports and Commentary from the Investment World

Reports and commentaries are posted here on a regular basis.


Priszm Canadian Trust.


Priszm Canadian TrustPriszm Canadian Trust.(QSR-UN:TO) 2006-05-29

This fund is in Canada and earns income in Canadian dollars.

High dividends are available from dependable businesses denominated in Canadian dollars.

Canadian income trusts can be attractive investments for dividend seeking investors.

Ones like Priszm  are definitely worth checking out.

Priszm is paying a Sustainable 12% Dividend right now.

The income is generated from fast food businesses.

Taco Bell, Pizza Hut, KFC, you name it,it would appear that North Americans are addicted to fast food.

And as long as Americans keep eating at these places, the 12% dividends will keep coming.

The Priszm Canadian Income Fund earns the cash from nearly 500 fast-food outlets in Canada. It then distributes nearly all of that cash every month in the form of dividends.

Currently, the monthly dividend is 10.5 Canadian cents per share, per month.

The current share price is hovering around C$10.65, which puts the annual dividend at just under 12%.

But is this double-digit dividend sustainable?

A dividend that high is usually a temporary thing. However;in the case of Priszm, we believe this dividend is sustainable, for the following reasons:

Priszm just reported its first quarter numbers at the end of April. Typically, Canadians don’t eat fast food as much in the winter. So the first quarter usually only makes up 7% to 10% of a full year’s distributable cash.

For the first quarter of 2006, the Priszm Canadian Income Fund reported distributable cash of around 14 cents per share. Looking at the worst case scenario then, say the rest of 2006 doesn’t go so well if that’s the case, then the  first quarter might make up a full 10% of the year’s distributable cash. Then that would mean that Priszm would bring home $1.42 of cash this year.

Since Priszm currently pays out 10.5 cents a month, over the course of a year, Priszm will distribute $1.26.
Priszm is scheduled to pay $1.26 a share in dividends this year, and $1.42 in distributable cash looks very doable.

The numbers seem to support the fact that Priszm can cover the huge dividend.

In addition to the very attractive dividends, the shares fell dramatically in late 2005 for a few reasons - fears of changes in the tax treatment of income trusts in Canada, fears of bird flu (most of Prism’s restaurants are KFCs) and other things all piled on at once.

But now that the worst is over, Priszm’s uptrend appears to be in place.

If all this was'nt enough to spark our interest, the Canadian dollar has appreciated dramatically versus the U.S. dollar in the past few years. It is up from a low of 79 cents last May to over 90 cents today.

So for a US dollar based investor, you would have made an additional 14% in Canada over the last year on any investment you’d made there, simply due to the strengthening of the Canadian dollar.

This is an added bonus for US dollar investors.

Buy Priszm (QSR-UN.TO)for a great dividend yield and the prospects for good capital appreciation.


Disclaimer: All the information above is provided as a service for individuals and institutions. It should in no way be construed as a recommendation as an investment. Investment decisions should be based on the risk tolerance and planning horizon of the investor. Market participants must understand that past performance is also not a guarantee or predictor of future results.