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Looking For Income?

04/18/11 09:04:48 AM
by Koos van der Merwe

The Keg is not only a restaurant that serves good food, it also provides a very comfortable monthly income.

Security:   KEG.UN-T
Position:   Buy

The Keg Royalties Income Fund (KEG.UN) operates as an unincorporated open-ended limited purpose trust. The company, through its investment in The Keg Rights Limited Partnership, owns the trademarks, trade names, operating procedures, and systems and other intellectual property used in connection with the operation of Keg steakhouse restaurants and bars in Canada and the US. As of December 31, 2009, it operated 109 restaurants in its royalty pool. The Keg Royalties Income Fund, which was founded in 2002, is headquartered in Richmond, Canada. At the current price, it is offering a yield of 9.5%. Even though income trusts in Canada now have to pay tax, it has remained an income trust; however, from January 2011 it pays a dividend of $0.08 per share instead of the $0.1065 per share it paid previously. Under Canadian tax laws, even though it has a reduced monthly payment, the dividend calculation gives it the same aftertax return. The share is therefore today found more in cash accounts than tax saving accounts.

Graphic provided by: AdvancedGET.
Figure 1 shows how the price has moved up steadily from the low of $5.89 in December 2008. In January 2011, it fell from $14.35 to a low of $12.02 in March 2011. Since then, it has recovered to its present price of $13.49. The relative strength index (RSI) is bullish, suggesting that the share price will retest the upper resistance line in the $15 range. The inverse head & shoulder formation that has developed is suggesting a target of $15.18. The effectiveness of previous RSI buy signals is shown on the chart.

The Keg Income Trust is definitely a share one should hold in a cash account.

Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

Address: 3256 West 24th Ave
Vancouver, BC
Phone # for sales: 6042634214
E-mail address:

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