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Canadian oil trusts got nailed pretty hard today following the announcement that the Finance Ministry wants to start to taxing dividends for the first time. Even though many investors have long worried about the high costs of oil sands exploration, Canadian oil companies such as Pengrowth Energy Trust (NYSE: PGH) and Penn West Energy Trust (NYE: PWE) have been used as a dividend plays for their rather large dividend yields. Today's announcement rocked both of these stocks. The Finance Ministry is looking to institute a 10% dividend on income trusts that would negatively impact non-residents by about 26.5%.
According to Finance Minister Jim Flaherty, the planned changes would result in existing trusts paying taxes in four years' time, but companies that convert to the trust structure after today would start being taxed in 2007.
PGH, which boasts an 11.1% dividend yield fell 13.2% today to $17.01 falling $2.59 and PWE who has a 9.8% yield gave back 15.0% in today's market falling $5.62 to $31.90.
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