In my role as an investment advisor, I spend a good deal of time researching strategies that will allow my clients to better align their investments with their values. The easy part involves screening out companies that are unsuitable, but this is only a small first step. I believe that the process of divestment is of only limited effectiveness. If we want to shape cleaner, safer, more just societies then our capital should be flowing to companies that are contributing to that process.
PACIFIC REGENERATION TECHNOLOGIES INC.
If you are looking for companies that might benefit from serious implementation of the Kyoto Accord, then PRT looks like an obvious candidate. They are the largest producer of container-grown forest seedlings in North America, operating 13 nurseries in Ontario, Saskatchewan, Alberta, and British Columbia (including Campbell River), and managing over 130 million seedlings annually. The Company is a wholly owned subsidiary of the PRT Forest Regeneration Income Fund, a publicly traded income trust. Units of the fund are listed for trading on the Toronto Stock Exchange under the trading symbol PRT.UN.
The fund pays it’s unitholders a monthly distribution of interest, dividends or capital, representing cash flow generated from the business of PRT. These distributions totaled $1.02 a unit in 2002, $0.96 in 2001, and $1.05 in 2000. A portion of these distributions is non-taxable, so an investment in PRT may be more suitable for someone seeking tax-advantaged income from a non-registered account. With PRT currently trading around $9.50, these distributions, if maintained, represent a yield of approximately 10%.
PRT’s increased distribution in 2002 is a very encouraging sign as they were faced with significant operating challenges relating to the poor business conditions in the forest industry. The impact of these pressures on PRT will extend into 2003, as the forest industry continues to face uncertainty over the resolution of the softwood lumber trade dispute, and low commodity prices for wood products. While 2003 will continue to be challenging, PRT remains optimistic about their prospects for the future. The trade issues facing the forest industry should eventually be resolved, and commodity prices should respond to economic recovery in the USA.
As stock markets falter, income trusts have been one of the few bright spots over the past couple of years. Falling somewhere between stocks and bonds in terms of risk, trusts have generated strong yields in an economy characterized by historically low interest rates. Trusts are an equity-based investment similar to mutual funds, but are traded on stock market exchanges like stocks.
Income trusts are essentially a type of business structure. Rather than issuing shares, a company will set up a public trust. All of the trust’s cash flow is distributed to investors, after expenses. For corporations that tend to generate a lot of cash, it’s a convenient and economical way to raise capital in a business environment where demand for share offerings may have dried up.
For conservative investors, income trusts present a chance to earn a steady flow of income at yields that are easily outperforming traditional debt instruments such as bonds. Trusts may also be a good fit for more aggressive investors looking to shore up their portfolios in the face of weak performance on the equity markets.