Understanding the New Brookfield BIPC and BEPC shares…

So you were happy with your TSE:BIP.UN and TSE:BEP.UN and now you have some new BIPC and BEPC shares in your account. It was a nice gift not worth turning down but now you have questions. The first question you are asking yourself is what’s the difference and the second question is which one should I own.

A lot of investors are a little annoyed at having two different shares of the same company and would like to consolidate. It definitely makes tracking what you own in a company a little different.

What’s the difference? (BIPC vs BIP.UN & BEPC vs BEP.UN)

In short, Brookfield created official Canadian entities with BIPC and BEPC for the representative income trusts shares with one goal to make the shares more appealing to Canadian investors as BIPC and BEPC pay a dividend instead of a cash distribution. The primary difference is the tax benefit for Canadians to own BIPC and BEPC over the other shares. 

This is a snippet from Brookfield:

Class A shares of BIPC are structured to provide an economic return equivalent to BIP units though a traditional corporate structure. Each BIPC Class A share has same distribution as a BIP unit, and is exchangeable, at the shareholders option, for one BIP unit.

While the dividend from the corporation is equal to the distribution from the income trust, the after-tax benefit could be better with BIPC or BEPC depending on the account you hold it. For selection simplicity, if you plan to hold one of them in a non-registered account go with the corporation.

The shares are not equal as in you cannot swap back and forth. The BIP.UN and BEP.UN cannot be exchanged for the BIPC and BEPC shares. Brookfield did a one time transfer to setup the corporation and after that you can transfer your corporate shares back into income trust shares but not the other way around.

Which one should you own?

Due to the benefits of the dividends, the stock prices of the corporate shares vs the income trust shares have already differed. Since the payout is the same in dividends or distribution, the yield is, however, different and will probably always be different.

Will the corporate shares always be more expensive because of the tax incentive in a non-registered account? If so, plan to hold the corporate shares (BIPC or BEPC) in a non-registered and the income trust shares (BIP.UN or BEP.UN) in the other accounts.

The corporate shares should only vary due to the tax incentive if they are the same business.