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Investment Q&A

Not investment advice or solicitation to buy/sell securities. Do your own due diligence and/or consult an advisor.

Q: Hello Peter, I understand that Power Corp has made nothing for investors for the past decade (apart from decent dividends). And Great-West Lifeco not much better. Recognizing that Power owns a good share of GWO, which would you prefer as an income investor going forward: POW, with an extra bit of yield and some interests other than GWO, or just GWO as a pure play on the lifeco? Thanks!
Read Answer Asked by James on August 28, 2020
Q: Do you see any reasonable prospect that any of the above will rebound or should I just sell and move on?

Thanks for your great service, Paul.
Read Answer Asked by Paul on August 28, 2020
Q: Given the recent corporate actions, I now own BEPC (100 shares) in addition to the BEP.UN shares (400 shares) I have owned previously. Going forward, which is the better investment to add to in my Canadian non-registered taxable account, BEP.UN or BEPC? Can you provide a brief rationale for your choice? Does it make sense to sell off the less attractive stock and add those proceeds to the more attractive position, or just carry both of them? Thanks.
Read Answer Asked by Randy on August 27, 2020
Q: Hello 5i Team
Publish as needed or as a start to a blog entry.
I performed a simplified after tax analysis of BEP.UN vs BEPC and BIP.UN vs BIPC.
Basis of Calculation
I used the 2019 distribution and related tax information from Brookfield website for BEP.UN and BIP.UN in Canadian dollars. I used the highest marginal tax bracket for Alberta for taxation rates.
BEP.UN / BIP.UN receive T-5013 tax form
BEPC / BIPC receive T-5 tax form
Results
BEP.UN you will receive 71.4% of income after tax if you assume ROC taxed each year (taxation of ROC is deferred until you sell the units and results in capital gains tax).
BIP.UN you will receive 82.1 % of income after tax if you defer ROC tax each year.
BEPC you will receive 68.3 % of income after tax.
BIP.UN you will receive 60.2 % of income after tax if you assume ROC taxed each year (taxation of ROC is deferred until you sell the units and results in capital gains tax).
BIP.UN you will receive 67.7 % of income after tax if you defer ROC tax each year.
BIPC you will receive 68.3 % of income after tax.
Going forward, BEP.UN will probably receive more foreign income (as a result of the Terraform merger) and will pay a higher overall tax rate.
BEP.UN and BIP.UN allow deferral of income tax due to Return of Capital, however this complicates an individual’s tax return when held in a taxable account.
It is difficult to truly estimate the taxes payable on BEP.UN / BIP.UN as the allocation to various tax components is not known until March of the following year. If ROC drops significantly (from 30 – 40 % of total income), the overall tax paid will increase. With BEPC/BIPC the tax percentage is known as BEPC/BIPC issue “eligible dividends” and no ROC is assumed.
All things being equal, I think it is best to hold BEP.UN / BIP.UN in a RRSP / TFSA where the slightly higher distribution yield, if re-invested in units, will result in a higher total return. In a taxable account it is probably best to hold BEPC / BIPC to avoid the headaches of tracking Return of Capital and the inclusion of a T-5013 form in an individual’s income tax form.
Each person’s results will vary as a result of province residence and marginal tax rates (13 province/territories x 5 tax brackets = 65 potential different tax rates).
Thanks
Read Answer Asked by Stephen on August 27, 2020
Q: Hello Peter, I am intrigued after reading that a Canadian can earn about $50,000 per year of dividend income without paying any income tax. I know about your income portfolio of course, but with a view to maximizing just Canadian eligible dividend income, what would you think of the following portfolio of 14 stocks. Equal weighted, the stocks would yield 5.3%. (Disregard lack of market diversification; this can be achieved in one’s registered accounts.) Also, if one wanted to pare down the list to 10, which 4 would you delete?
BCE, CM, ENB, FTS, CNQ, AQN, CPD, FSZ, MG, KBL, POW, ALA, BIPC and NTR. Thanks!
Read Answer Asked by James on August 27, 2020
Q: Pason's current price and cash might look appealing to someone who doesn't have any exposure to oil in their portfolio. What are your thoughts on Pason at this time? Would you prefer a producer like Suncor or something midstream like Enbridge?
Read Answer Asked by Bashir on August 27, 2020
Q: I currently have a total of 5% of my portfolio in an equal combination of ENB and PPL. How advantageous (if at all), would it be to add BPMP for the sake of its dividend and seemingly low current valuation? As this would be a non-registered account investment does the tax treatment of U.S. dividends present a material issue?
Read Answer Asked by David on August 26, 2020
Q: Further to my question of August 24, John Heinzl of the Globe mentioned if you were exchanging BIPC for BIP.UN, you would lose money because BIPC is worth more. In your answer you have mentioned it was somewhere in the neighbourhood of $8.00. The reason is by making the exchange which is in my TFSA with an adviser which has limited yearly trades and then after that, trades become over $50 per trade. That way, the exchange would cost me nothing and I would have one lump sum of BIP.UN which would cost me 1 trade and I would take the cash out of my TFSA and I would buy BIPC in my online non-registered account with another institution for $9.99. Would I be losing the $8.00 (or somewhere in that area) per share by doing this, OR if, for example, I had $9,000.00 worth of BIPC shares which became BIP.UN in the transaction, would I get $9,000.00 worth of BIP.UN shares? I am just concerned I am clear on this. Thanks Dennis
Read Answer Asked by Dennis on August 26, 2020
Q: I hold ET in a registered account, and as it is a MLP I've had non-resident taxes withheld from dividends. They have indicated that they will likely convert to a c-corporation, and I'm wondering how that would affect the withholding tax on distributions, and if that would automatically mean a lower distribution.
Read Answer Asked by Rick on August 25, 2020
Q: What with the obvious appeal of Enb:CA and Ppl:CA, you may not get too many questions regarding U.S. pipelines. Regardless, can you give me your opinion of BPMP vs Enbridge/Pembina from a tax-resistance, dividend reliability and valuation perspective? Do you perceive other pipeline companies as greater value/dividend opportunities?
Read Answer Asked by David on August 25, 2020
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