Boston Pizza Updated August 19, 2022

The Boston Pizza Royalties Income units return to our list and are rated Buy at $16.70. They are a bit more attractive at $16.44 as I post this.

My last update on these units was early 2021 when the distribution was 6.5 cents having been suspended with the pandemic and then reinstated at that low rate. At that time I was cautious though I said the distribution might go to 8 cents by end of 2021 and none cents in 2022. In fact it went to 8.5 cents in fall 2021 and now ten cents. It’s been an extremely wild ride with the pandemic but barring another meteor hit like that these units should be a reasonable long term hold for the cash distribution and probably a modest capital gain over the next few years. Of course they will not be immune to general market declines if that happens.

The taxation of the units is a bit complicated. About 25% of the distribution is usually tax free return of capital but requires you to reduce your cost basis if held in a taxable account. The remainder is eligible for the dividend tax credit in Canada. (That’s unlike the case for REITS). You can avoid all tax complexity by holding these units in non-taxable accounts.

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