Link to company:

http://www.google.com/finance?q=TSE:PZA.UN

Its a Canadian chain of pizza shops that from the few people i've surveyed is pretty good and is comparable to a slightly better version of Little Caesars in the states. Anyway this company pays a .0775 dividend each month. From what i understand they only profit off of top line sales, so they simply need same store sales growth to be maintained, or increased for them to do better. So I get this, I think at least, but don't understand why or how they are able to give away so much equity to investors....Am i missing something here?

It is an income trust. This was a way to structure businesses for tax purposes. It was originally intended for a specific type of business but became insanely popular so in 2006 the government said they would start taxes income trusts the same as corporations with certain exceptions for specific industries and private trusts. Pizza Pizza will either have to convert back to a corporation in 2011 or stay a trust and lose the tax benefits it had in the past.

What Henry is talking about is also called a Canadian Royalty Trust or CanRoy when it comes to oil and natgas - but the idea is the same for what he described.

So that would mean then that this business model is unsustainable amirite?

No. It means that they're going to pay more in taxes in the future.

No. It is perfectly sustainable. The model is appropriate for specific types of business more than others but there is nothing that makes them unsustainable. As of 2011 the tax advantages are being eliminated so the whole point of having the income trust model is gone but REITs will continue as will private trusts for non-real estate businesses.

Appreciate the help. I guess what im getting at is if this is such a good investment, why isn't everyone getting in on it?

They give away the equity because they earn royalties from franchises and don't have any great need to reinvest income on growth opportunities.

I'm not really familiar with Pizza Pizza but income trusts in general were very popular until Oct 31 2006 with income seeking investors (especially retired people). Getting distributions that amounted to 8% or more yield was standard. Even now there are 23 income trusts with distributions that yield more than Pizza Pizza's 11%. I have no idea if they can sustain that since I don't know the companies but I have invested in income trusts in the past and there is a private trust I am interested in now that has sustainable distributions that come out to 11%. The threat that the banks and Bell Canada were going to convert from corporations to income trusts led the government to shut this down. So in 2006 they announced that income trusts that were not REITs would be subject to a new tax as of 2011. I'm not really an income investor so I'm sure someone knows the subject better.

For many investors, it doesn't matter much if you receive distributions from an
income trust or a corporation if you are considering the adjusted yield.

The nature of the income doesn't add a whole lot automatically.