Bonds from converted trusts tend to receive so-called junk- bond ratings of lower than BBB- at Standard & Poor's, meaning the debt is high-yield and high-risk, because the companies tend to be smaller and pay higher dividends than other issuers, Bank of Nova Scotia's Follis said.

Groupe Aeroplan Inc., Homeq Corp. and Newalta Corp. issued bonds last year after converting to corporations, while four other companies, including mortgage lender First National, issued bonds before converting.

First National's 5.07 percent bond maturing in May 2015, rated BBB by DBRS Ltd., has returned 9.2 percent since its issuance last May, compared with a 4 percent return for a Bank of America index of Canadian BBB rated corporate bonds.

The Bank of America Merrill Lynch Canada High Yield Index has gained 0.8 percent this year, adding to returns of 22 percent last year and 32 percent in 2009.

In April 2009, investors demanded 15 percentage points more in yield for Canadian junk bonds over federal bonds. Since then, the yield on the High Yield Index has fallen to 7.4 percent from 16.9 percent.

Eoin Treacy's view A large number of Canadian income trusts have converted to corporations as a result of a change to the tax code. In some cases they have decided to pursue an identical business plan and have continued to pay their dividends. However, a number of others have opted to pursue a more aggressive growth trajectory. The corollary is that they will no longer be in a position to pay the same high dividends.

However, many converted income trusts are now tapping the debt markets to fund their expected growth. Since most are rated below investment grade their debt often has a relatively high yield. Therefore, their debt may be attractive to income investors, subject to he appropriate due diligence.