* Dividend seen at C$0.20 vs C$0.50 last quarter
* Shares down 8 pct at C$26.20
CALGARY, Alberta, Dec 3 (Reuters) - Canadian Oil Sands Trust COS_u.TO units skidded 8 percent on Friday after the largest owner of the Syncrude Canada oil sands joint venture said its payout could drop by more than half after it converts to a traditional corporation.
In its 2011 budget details, Canadian Oil Sands said it expects to pay a first-quarter dividend of 20 Canadian cents a share. That is down from its October quarterly distribution of 50 Canadian cents a unit.
Canadian Oil Sands, which owns 37 percent of Syncrude, plans to convert to a corporation from an income trust at the end of the year.
Its units were off C$2.21 at C$26.20 on the Toronto Stock Exchange on Friday morning, with more than 3 million units changing hands.
The trust expects capital spending of C$930 million ($920 million) next year, with Syncrude synthetic crude production targeted at 301,400 barrels a day amid expectations of fewer unplanned outages.
The spending is higher than expected, and operating costs are also on the rise, UBS Securities Chad Friess said in a research note. He downgraded the units to "sell" from "neutral" with a target of C$26, down from C$28.
$1=$1.01 Canadian Reporting by Jeffrey Jones; editing by Peter Galloway