Income Trusts
Income trusts are one of the fastest growing segments of the Canadian
investment industry. Investors have been attracted to income trusts
in recent years by their high distributions.
Income trusts are often thought of as fixed-income securities
because they pay a fixed distribution at regular intervals. However,
income trusts are also very similar to equities because their return
depends primarily on earnings of the underlying business.
There are several types of risks to consider when investing in
income trusts—perhaps the most important is the quality and
sustainability of earnings. If the trust does not generate sufficient
cash flow to cover its regular distribution, the payment either
has to be reduced or supplemented by a portion of the investor’s
original investment. The latter is known as a "return of capital."
Like any other asset class, income trusts have benefits and risks
that should be considered within the context of an overall portfolio.
To learn more about fixed-income investing, please continue by choosing one of the following
topics:
To learn about individual RBC Funds and how they can address
your investment objectives, access our Fund
Updates. If you are ready to invest now, contact your advisor
or explore the options
available to invest with RBC Financial Group.
|
