Trusts have to be cash flowing businesses. Typically they are highly-taxed, mature companies that have low capex demands.

What sets them apart from any other company is that when legally structured in the form of a trust these companies pay no corporate income tax, but flow the optimally highest distribution of cash out to unit holders who pay tax at the personal level.

This is a dream for non-taxed offshore accounts or to tax-deferred retirement accounts.

The problem is that no formal, regulated definition of distributable cash flow exists, so the management of these companies are given freedom to play fast and loose with their payouts, and many do. In some cases, it's been trust today; broken trust tomorrow.

Therefore, I advise caution for investors looking for high dividend payouts. You may find one day that your total return is cut down or even go negative based on share price performance.

The best solution is to do your homework. In Canada, all the major banks " Royal, CIBC, BMO, Scotia and TD " have excellent research departments. When it comes to trusts, I feel these banks are very careful not to mislead the customer.

The bottom line is to try to get your hands on the research. If you have an account with a Canadian broker, that's easy. If not, I can publish the odd paper without ticking off too many people.

What these publications will provide is the type of report format that you might find satisfactory. If so, there is a phone number or e-mail address that is a contact point. You can phone a manager in equity sales and ask to be put in touch with a specialist in trusts " if that's your interest.

It might be mining or gold stocks too, and these are very well covered by Canadian research and broker-dealer firms. But that's another situation.

Today, I'm going to publish some recent reports on Canadian trusts from two of the top five Canadian banks. Some months ago I gave you a report on trusts from a third broker-dealer. Also there is another broker that excels in the energy trust sector, so I'll add a report from them too.

TD Newcrest

Download Report on Trusts.
Download Power company trusts.
Download Oil&Gas company trusts.

BMO Capital Markets

Download Weekly Trust Tracker file

Peters & Co Energy Update (2 or 3 pages on energy trusts)

Download Energy Update.

I'll give you five Canadian trusts (in alpha order) that are highly rated by TD and BMO. They are:

HOT-UN.TO CHIP (Hotels)

INN-UN.TO Innvest (Hotels)

KCP-UN.TO KCP (Consumer Staples)

PWT-UN.TO Penn West Royalty Trust (Energy) Also trades on NYSE as PWE (9.8 pct yield)

VET-UN.TO Vermillion Royalty Trust (Energy)

The last thing I'll say is that the highest yielding trusts are quite likely to be the weakest and the first ones to be broken in the event of a severe recession. Caveat emptor.