Q: My last question asked about dividends for this company. You answered “ SRU.UN pays a 'distribution' now yielding 8.1%. Keep in mind this is taxed differently than a Canadian dividend, and the tax breakdown can vary yearly. ”. Can you provide some insight on the two points in the last sentence. Thank you.
5i Research Answer:
Real estate income trusts (REITs) have a different corporate structure and taxation rules. They are required to pay a large portion of cash flow out to unit holders, and the distribution is typically taxed at the investor level. The payout can consist of interest, foreign income, capital gains and return of capital. Thus, the Canadian dividend tax credit does not apply. Also, the tax allocation can vary each year, depending on the business and activity of the REIT in any particular calendar year. In 2023, for example, the payout was taxed as 80.1% 'other income, 2.75% capital gains and 17.15% return of capital.