In recent years Enbridge has always announced dividend increases in early December but I haven't seen any news yet. Do you have any insight as to what's going on?
On Enbridge Inc.'s third-quarter conference call in November, chief executive Al Monaco said the company planned to delay its usual December dividend announcement until January in light of the proposed $37-billion acquisition of Houston-based Spectra Energy Corp. The January dividend will be based on Enbridge's "standalone 2017 outlook," Mr. Monaco said. Contingent upon the deal's closing – which is expected some time in the first quarter – Enbridge expects to deliver an aggregate dividend increase of 15 per cent for 2017. That would include the January increase, plus any "true-up" that would be announced as part of the next regularly scheduled dividend announcement after the deal closes. Shareholders of both companies voted in favour of the deal this week but it still requires regulatory approvals.
I have been told by my accountant that distributions from real estate investment trusts (REITs) are taxed as regular income and at a much higher rate than dividend income. Could you please clarify this for me?
Your accountant is only partly right. Unlike many publicly traded Canadian corporations whose dividends qualify for the dividend tax credit, REIT distributions – they aren't strictly dividends – often include several components such as capital gains, return of capital (also known as reduction of adjusted cost base), other income and foreign non-business income. The percentages vary depending on the particular REIT, but other income – which is taxed at your marginal rate – is often (but not always) the largest component. About 88 per cent of Canadian REIT's total 2015 distributions, for example, were classified as other income. At RioCan, other income accounted for about 64 per cent of 2015 distributions. Capital gains are usually a smaller portion of the distribution and are effectively taxed at half your marginal rate, while return of capital is not taxed immediately but is deducted from your ACB. If you have questions about a particular REIT's distributions, you can usually find detailed tax information on its website.
I have a stock with an unrealized capital loss. When is the last day I can sell it so that the loss is recorded in 2016 to offset capital gains I have realized this year?
If you want your trade to be recorded in 2016 for tax purposes, the last date for Canadian stock transactions is Friday, Dec. 23. Why so early? Stock sales and purchases settle – that is, money and shares actually change hands – three business days after the trade date. The Toronto Stock Exchange is closed on Dec. 24 and Dec. 25 (a weekend) and will also remain closed on Dec. 26 (in lieu of Christmas Day) and Dec. 27 (in lieu of Boxing Day). That means a trade on Dec. 23 will settle on Dec. 30. If you sell your shares after Dec. 23, your trade will be recorded in 2017 for tax purposes. You have more time for U.S. stocks. Because U.S. exchanges will be open on Dec. 27, that is the last trading date for U.S. stock transactions to settle in 2016.
When I look up stock returns on my globeinvestor.com watchlist and compare them to the returns on a separate website you've mentioned, longrundata.com, the numbers don't agree. For instance, my watchlist says Royal Bank's five-year annualized compound return was 13.4 per cent, but longrundata.com says 18.3 per cent. Who's right?
They both are. The watchlist return measures price appreciation only, whereas longrundata.com calculates the total return that includes dividends and assumes they were reinvested in additional shares.
John Heinzl