"Canada, some may be surprised to learn, is America's largest oil supplier." So says NBC newscaster Tom Brokaw in an inspiring six-minute clip that aired in February before the opening of the Olympics in Vancouver, British Columbia.

In all, the United States imports about 2 million barrels per day from its neighbor.

Much of that oil comes from high-yielding energy trusts, like Penn West or Enerplus, which are based right here in my home city of Calgary, Alberta.

The trust model makes sense for Canadian energy producers with mature reserves that generate predictable cash flow. The oil and natural gas reserves offer up plenty of cash to pay investors. Meanwhile, trust rules mean that the business has to pass along the bulk of cash flow to investors. The result is high yields that attract shareholders and boost the share price.

It's a win-win: The trust enjoys high-priced equity capital to finance growth, and investors receive superior income taxable at the reduced dividend rate in the U.S. (Canadian investors also had it good; they could defer taxes by placing trust units in a registered retirement savings account.)

But the party was too good to last. In nine months, these trusts will no longer exist in their current form. Fearing the loss of billions of dollars in tax revenue, the Canadian government announced on October 31st, 2006 that trusts would lose their tax-favored status starting on January 1, 2011. The proposal was known here in Calgary as the "Halloween Massacre," and the Canadian "Oil Patch" lobbied hard to beat it down, but was unsuccessful.

Fearing the end of double-digit yields and tax-advantaged income, investors on both sides of the border dumped their units in droves. Trusts lost over -30% of their value in the weeks following Prime Minister Harper's initial proposal, and the units (shares are known as "units" in trust lingo) were pummeled even more during the recession.

What's Next for Canadian Income Trusts?
The uncertainty of what will happen next has weighed on trusts. Most will convert over to ordinary corporations, but which ones? Which will get taken over? Which will cut their payouts to conserve cash and focus on production growth? Which will keep paying dividends at the same rate?

But now the clouds are starting to clear. According to Canadian investment dealer RBC Dominion, 72 income trusts have been acquired at an average premium of +14% above their trading price. Another 40 have converted to dividend-paying corporations.

A recent survey by investor relations firm BarnesMcInerney and others showed that 84% of the 165 Canadian income trust CEOs polled expect to cut cash distributions when they convert trusts into traditional corporations. But all is not doom and gloom. Yes, some are cutting payments, but others are saying they will maintain the current rate if they have the cash flow.

So in a search for what I call "high-yield keepers," I've conducted my own study. At the conclusion of today's article, I've identified about 20 Canadian income trusts and former trusts with yields of around 6% or more that are committed to keeping distributions at current levels.

But there are plenty of very popular trusts that investors have questions about. That's why I've researched the current plans for some of Canada's most revered income trusts.

To see where some of the major players are positioned for the future, read on...

Growth Mode For Some
One avenue available to trusts it to convert to a corporation and then shun the focus on income and instead look to grow production.

While a number of trusts have done this, surprisingly few have entirely eliminated the dividend as they moved from an income model to an exclusive growth mode. But at least three once high-yielding trusts have opted to do so.

For example, Advantage Oil & Gas (NYSE: AAV) converted to a "growth-oriented corporation" in July 2009 and paid its last monthly distribution of $0.04 per unit in March, down from $0.08 per unit the month before. Going forward, management said it "does not anticipate paying dividends in the immediate future." Instead, it will use the cash flow to reduce debt and focus on developing its natural gas assets.

Bellatrix Exploration (OTC: BLLXF; TSX: BXE) and Enterra Energy Trust (NYSE: ENT) are quitting distributions to focus more on being growth-oriented producers.

More companies, however, are cutting rather than eliminating their dividends, as they simply try to live within their means and provide sustainable dividends going forward.

Gas producer Trilogy Energy (OTC: TETFF; TSX: TET) completed its conversion this February after saying it would cut its monthly dividend -30% to C$0.035 per share for a current yield of around 5%. Media publisher Yellow Pages (OTC: YLWPF; TSX: YLO.UN) said in February it will cut the monthly dividend by -19% to C$0.054 per unit when it converts later this year, providing a still juicy yield of over 10% at today's price.

Numerous other trusts are repeating the same mantra -- they won't stop paying distributions, but future distributions will likely be lower. This includes companies with plans to focus more on growth or simply trying to live within their means:

Innergex Power Income Fund (OTC: INRGF; TSX: IEF.UN)	A&W Revenue Royalties Trust (OTC: AWRRF; TSX: AW.UN)
Daylight Resources (OTC: DAYYF; TSX: DAY.UN)	Canadian Oil Sands (OTC: COSWF; TSX: COS.UN)
Peyto Energy (OTC: PEYUF; TSX: PEY.UN)	Zargon Energy (OTC: ZARFF; TSX: ZAR.UN)
Arc Energy (OTC: AETUF; TSX: AET.UN)

Sitting on the Fence
Some of the more popular trusts with U.S. investors (because they trade on the New York Stock Exchange) are saying they will tell us more in the months ahead.

Penn West (NYSE: PWE) CEO William Andrews said in the latest earnings report he will keep the monthly distribution steady at least for the current quarter, but won't confirm the rate will stay the same post-conversion until first-quarter results come out in May. The distribution outlook is not looking promising, given that in years past the trust was heavily focused just on payments. "As a corporation, Penn West will focus on total shareholder return. This will consist of both growth and income from dividends," Andrews stressed.

Some trusts are saying they have enough tax pools to shelter their cash flow from income taxes for several years after December 31, 2010. These pools are accumulated business losses that can be deducted from income in future years, thereby sheltering cash from future taxes. As such, tax pools can be extremely advantageous, even more so now that trusts have been prohibited by the government from gaining additional tax pools by simply acquiring any company with large business losses.

Even with tax pools, however, management must still decide whether to use the tax-advantaged cash to grow the company or provide big payouts to investors. For example, Advantage Oil & Gas, mentioned above, has estimated tax pools of $1.5 billion, but has eliminated its distribution and will be using them simply to shield future cash flows from corporate tax.

Meanwhile, Enerplus (NYSE: ERF) stressed its commitment to distributing "a significant portion" of cash flow to shareholders after converting to a corporation around January 1, 2011. Tax pools provide "shelter from cash taxes for two to three years beyond 2010," management said. Distributions will vary with cash flow, management added, but payments won't need to be adjusted "as a result of" converting to a tax-paying corporation.

Provident (NYSE: PVX) is still on the fence. No word on the distribution, but the company did say it has some $1.2 billion of tax pools available. Last year, management also asserted "it was in the best interest of unitholders that Provident remain structured as a cash-distributing, diversified energy enterprise." Meanwhile, monthly distributions have stayed steady.

Committed to Yield
In contrast to Enerplus and Provident, Pengrowth (NYSE: PGH; TSX: PGF.UN) has committed to using tax pools to maintain the current distribution. In its latest earnings report, the company said it plans to become a dividend-paying corporation in 2011 and has enough tax pools to keep the dividend at the same rate: "With the availability of approximately $2.9 billion worth of tax pools, the conversion to a corporate entity will occur with little or no impact to Pengrowth's ability to distribute the same level of cash to its shareholders." Analysts estimate the tax pools should cover dividends through 2013.

Vermilion (OTC: VETMF; TSX: VET.UN) has so far delivered one of the clearest statements of intentions. In its latest fourth-quarter earnings release, Vermillion confirmed that "effective September 1, 2010, Vermilion is planning to convert back to a corporate structure and intends to maintain its current business strategy following conversion, including the current level of distribution."

In my list below, I've identified a number of other businesses that appear committed to maintaining a high yield following a conversion from the trust model.

High-Yield Converts
Fortunately for us yield-loving investors, over a dozen trusts appear committed to keeping their dividend at the current rate and have already jumped through the hoop of converting to a corporation.

"Reliable Income" holding Bonterra Energy Corp. (OTC: BNEFF; TSX: BNE) is one of the higher-yielding among them. One of the more proactive trusts, it converted to a corporation in 2008. As clearly stated on its website and in press releases, management "intends to continue with a cash dividend policy similar to the distribution policy previously followed by the trust."

This oil and gas producer has generated rather remarkable total returns of +48% in just six months since we featured it as an International "High-Yield Security of the Month" in October. We expect the shares to continue to outperform as commodity prices strengthen. Equally important, the impressive performance to date bodes well for other trusts that plan to keep their distribution at the same level post-conversion.

As you would imagine, new announcements come out every day, but my list below is a snapshot of where things stand in trust land right now. In this table, I've identified higher-yielding Canadian trusts (or former trusts) that have kept their dividends intact or plan to do so under the new tax regime:
 

Company (Ticker)	Price ($ CDN)	Yield	Freq.
Paramount (OTC: PMGYF; TSX: PMT.UN)	$4.80	12.5%	M
Superior Plus (OTC: SUUIF; TSX: SPB)	$14.20	11.4%	M
Fort Chicago (OTC: FCGYF; TSX: FCE.UN)	$10.80	9.3%	M
Chemtrade (OTC: CGIFF; TSX: CHE.UN)	$13.20	9.1%	M
Pembina (OTC: PMBIF; TSX: PIF.UN)	$17.26	9.0%	M
Just Energy (OTC: JUSTF; TSX: JE.UN)	$14.17	8.8%	M
Colabor (OTC: COLFF; TSX: GCL)	$12.35	8.7%	Q
Northland Power (OTC: NPIFF; TSX: NPI.UN)	$13.47	8.0%	M
Extendicare ( OTC: EXETF; TSX: EXE.UN)	$10.70	7.9%	M
Inter Pipeline (OTC: IPPLF; TSX: IPL.UN)	$11.71	7.7%	M
Pengrowth (NYSE: PGH; TSX: PGF.UN)	$11.60	7.2%	M
Crescent Point (OTC: CSCTF; TSX: CPG)	$38.88	7.1%	M
Keyera (OTC: KEYUF; TSX: KEY.UN)	$26.66	6.8%	M
Wajax (OTC: WJXFF; TSX: WJX.UN)	$26.90	6.7%	M
Vermilion (OTC: VETMF; TSX: VET.UN)	$35.33	6.5%	M
Baytex (NYSE: BTE; TSX: BTE.UN)	$35.06	6.2%	M
Brookfield (OTC: BRPFF; TSX: BRC.UN)	$21.30	6.1%	M
Bonterra (OTC: BNEFF; TSX: BNE)	$36.50	5.9%	M
Ag Growth (OTC: AGGZF; TSX: AFN)	$35.70	5.7%	M

All of these companies carry compelling yields, but some of them may have the wherewithal to support their payouts better than others. Today, I've identified Keyera and Extendicare (profiled below) as strong companies which are positioned to offer a generous income stream in the years ahead.

While both stocks trade over-the-counter (OTC) in the U.S., you are generally better off buying the shares directly on the Toronto Stock Exchange (TSX). The Canadian-listed units are more liquid, making them easier to buy and sell. Most brokerages allow you to trade Toronto listings, but you may need to call your broker if online access to this exchange isn't available.

A Final Thought on the Canadian Dollar
In addition to strong yields, the Canadian equities listed above also offer a way to ride the Canadian dollar higher. The share price and income are denominated in Canadian dollars, so as the loonie (Canadian dollar) gains value against the greenback, your shares and dividends grow at exactly the same rate.

In total, the Canadian dollar has risen +21% over the past year. That means the income you receive from these Canadian trusts has also increased +21% and the value of the shares has appreciated by more than +21% as well, when translated into U.S. dollars.

Better yet, the loonie is expected to keep strengthening against the dollar. A much anticipated interest rate hike in July by the Bank of Canada, growing demand for the country's oil and gas exports, foreign takeover interest, and fears about sovereign credit defaults in countries that don't share Canada's coveted "AAA" credit rating are all factors that will drive the loonie beyond parity with the U.S. dollar by the summer, says the Canadian Imperial Bank of Commerce (NYSE: CM).

Note: Like other foreign dividends, Canadian distributions are subject to a 15% withholding tax that is withheld by your broker before distributions are paid to unitholders. You can receive a tax credit for the withholding tax if the units are held in a taxable brokerage account. Once the trusts convert to corporations, if they are held in a retirement account, the shares may be exempt from withholding tax, according to the amended Canada-U.S. Income Tax Convention.