Share Buy Backs

Killam Properties Inc. is a corporation (NOT A REIT ) , listed on the Toronto Stock Exchange, that deals with rental real estate.  Killam Properties Inc  made their  first purchase in 2002.   Killam Properties has properties that are located in Atlantic Canada and Ontario. Killam Properties Inc. also own  44 manufactured home communities, or land lease communities that are located in Atlantic Canada in Ontario. Killam Properties Inc. can keep more of the profits to grow the company as they are not obligated to pay out 90% of their profits to investors like a REIT.  Killam Properties pays a dividend as it is a corporation whereas a REIT pays a distribution.

Killam Properties Inc. recently been approved to buy back 2500000 shares over a 52 week period.   The shares will be retired when Killam purchases them on the open market. 

Why would a company buy back its own shares? A company will buy back its own shares when they feel the share price of their stock doesn't accurately represent the current value of their company. Buybacks can be a good use of company funds at the right price and beneficial to remaining investors as these investors get to own a bigger percentage of the company.

As of this post, I currently own 395 shares of Killam Properties Inc. I get to own a bigger percentage of this company at no cost to me. As the amount of shares outstanding decreases, the share price will likely increase due to supply and demand issues.

When shares are retired  as a result of buy backs the EPS automatically goes up and vice versa when the company issues more shares.   This could fool investors. So investors need to do their due diligence  in which they can discover an increase of decrease in the amount of shares outstanding, and in turn earnings year to year.


Disclosure  : Long KMP.TO (Killam Properties)

DISCLAIMER:

     I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.  Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk

REITs - Part 2

This is a continuation from my previous post on REITs.

Some Advantages:

• A small funded investor can get expose to the real estate market
• The yields are high as the distrutions are high as REITs must payout 90% or more of their profits to shareholder.
• Don't have to deal with tenants directly and all the problems that comes with it.
• Managed by experts.
• Some tax advantages depending on the break up of the distribution payments.

Some Disadvantages

• you don't get all the tax breaks if you own rental real estate directly.
• you don't have control over the investment

As you travel around a city and see large commercial buildings, they are, more than likely, owned by a REIT. The tenants of the buildings or section of a buildings sign long term leases with the REIT.  The earnings from rent and sales of income producing real estate are passed on to the investors as REITs are required to payout 90% or more of their profits to investors. By doing this they are not required to pay corporate tax.

My first REIT I purchased was Whiterock REIT. My yield on cost was 9.1%. The entire distribution was 100% return of capital so there was no tax on the distributions.  The REIT was acquired by Dundee REIT. I decided to redeem my shares at this point. The return of capital that I received was subtracted from my adjusted cost base, there by lowering my ACB. This mean my capital gain was higher as I sold the units had a higher price than what I paid for them.  I transferred the proceeds of this sale to my tax free account and initiated a position in Dundee REIT.

Note: Not all REITs have distributions that are 100% Return of capital. So you will have to pay taxes on things like interest. In Canada, the distributions ARE NOT eligible for the dividend tax credit as the REIT doesn't pay corporate tax.

                                                            Telus Tower (Calgary Alberta)
                                                               owned by Dundee REIT

Being an unit holder of Dundee REIT I own a very small piece of this building and many others.

Disclosure : long  Dundee REIT

DISCLAIMER:

     I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.  Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk

REITS - Real Estate Investment Trusts - Part 1

This is a continuation from my previous post on REITs.

Some Advantages:

• A small funded investor can get expose to the real estate market
• The yields are high as the distrutions are high as REITs must payout 90% or more of their profits to shareholder.
• Don't have to deal with tenants directly and all the problems that comes with it.
• Managed by experts.
• Some tax advantages depending on the break up of the distribution payments.

Some Disadvantages

• you don't get all the tax breaks if you own rental real estate directly.
• you don't have control over the investment

As you travel around a city and see large commercial buildings, they are, more than likely, owned by a REIT. The tenants of the buildings or section of a buildings sign long term leases with the REIT.  The earnings from rent and sales of income producing real estate are passed on to the investors as REITs are required to payout 90% or more of their profits to investors. By doing this they are not required to pay corporate tax.

My first REIT I purchased was Whiterock REIT. My yield on cost was 9.1%. The entire distribution was 100% return of capital so there was no tax on the distributions.  The REIT was acquired by Dundee REIT. I decided to redeem my shares at this point. The return of capital that I received was subtracted from my adjusted cost base, there by lowering my ACB. This mean my capital gain was higher as I sold the units had a higher price than what I paid for them.  I transferred the proceeds of this sale to my tax free account and initiated a position in Dundee REIT.

Note: Not all REITs have distributions that are 100% Return of capital. So you will have to pay taxes on things like interest. In Canada, the distributions ARE NOT eligible for the dividend tax credit as the REIT doesn't pay corporate tax.

                                                            Telus Tower (Calgary Alberta)
                                                               owned by Dundee REIT

Being an unit holder of Dundee REIT I own a very small piece of this building and many others.

Disclosure : long  Dundee REIT

DISCLAIMER:

     I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.  Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk