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Number Cruncher

Trusts have gained, but lag the market rebound Add to ...

What we're up to

This is the fourth and final instalment of our reality check on four crunchers that appeared early last April, when the stock markets were plunging. At that time, we focused on stocks and income trusts that ranked both well and not-so-well as wealth creators for shareholders using a strict gauge of profitability called economic value added, or EVA. Here, we look at income trusts that last April received top marks as wealth creators. How have they fared in the stock market rebound?

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Today's screen

In our original screen, we looked for trusts with yields of more than 4 per cent, that had fallen more than 20 per cent over the previous 12 months, and that scored a 1.0 or more on what's known as the economic performance index, or EPI. As used by the Montreal-based analysis firm Stockpointer (stockpointer.ca), the EPI is a way of comparing corporate wealth creation across different sectors. Technically speaking, the EPI is a ratio of a stock's return on capital to its cost of capital, including debt and shares.

What we found

Almost all of our wealth-creating income trusts have rebounded nicely from their levels of March 31, but not as much as the broader stock market or other groupings of stocks we've looked at this week. On average, the trusts presented here are up a bit over 37 per cent. The top wealth creating stocks we looked at yesterday averaged a gain of almost 89 per cent since the market depths of March 31, and the not-so-great wealth creators we checked in with on Wednesday made almost 61 per cent on average (their high dividend yields must have been an attraction). Meantime, the S&P/TSX composite is up more than 50 per cent from its March lows. What's the deal with trusts? Perhaps investors are being cautious as we approach the 2011 introduction of a new federal trust tax. Note that Stockpointer supplied up-to-date EPI numbers and each of the trusts on the list remains a solid creator of wealth for shareholders.

Addendum: Some readers have questioned the dividend data for stocks mentioned in the first three of this week's cruncher series. They reflect dividends actually paid over the previous 12 months and do not use the current quarterly payout as a reference. Today's yields reflect current dividend payouts.

 

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