For one day at least it was like 2008 all over again.

On the afternoon of May 6–with panic inspired by Europe’s sovereign debt crisis running amok–investors sold off everything from rock-steady regulated utilities to growth stocks, pouring their funds once again into US Treasury paper.

Our high-yielding Canadian stocks held up at first but finally succumbed to a selling wave, made worse by a parallel decline in the Canadian dollar.

Then, just as suddenly as it had blown up, the storm blew out. A more than 1,000 point plunge in the Dow Jones Industrial Average was almost completely erased by the end of the day. Even the hardest hit equities quickly retraced the lion’s share of their losses.

Our Canadian Edge Portfolio picks now trade at roughly the same levels they did a week ago, before the selloff. The only losers were investors who were sold out near the lows, either from poorly placed stops or by acting on the emotion of the moment.

Unless you’re an adrenaline addict or a hedge fund manager, you probably don’t like these gut checks. Unfortunately, until this global economic recovery really gets off and running, the risk is high that we’ll see have more of them.

The “Four Horsemen” I featured in the May issue’s In Brief that triggered the selling are still very much with us. BP’s (NYSE: BP) oil spill in the Gulf of Mexico is apparently still uncapped and well on track to become the biggest environmental disaster since Chernobyl. Europe has gone nuclear with its battle to contain the sovereign debt crisis, with monetary authorities staking nearly USD1 trillion on the battle. But several key countries remain heavily out of fiscal balance, and the clock is ticking on investors’ patience.

Confusion reigns supreme on what investor taxes will be in 2011, with rumors flying around that rules might be changed even for US master limited partnerships (MLP). And finally, judging from the popularity of Treasuries, investor worries about a double-dip recession resulting from any number of problems are as great as ever.

That’s a formula for more panicked days ahead. And as we saw on May 6, there doesn’t have to be a rational catalyst.

Fortunately, there’s a rich silver lining to what appears to many only a very dark cloud. First, major debacles like what happened in late 2008 are only possible when enough people are leaning the wrong way with leverage. That’s not the case today. In fact, more corporations have progressively deleveraged over the past year, making them better able than ever to handle credit market shocks. That certainly applies to our Portfolio recommendations, all of which did maintain their access to credit during the 2008 credit crunch and the subsequent recession.

Second–and even more important–is the underlying strength of our recommended companies. Our oil and gas producers saw their cash flows slip along with energy prices from mid-2008 into March 2009 and were forced to trim dividends. Nonetheless, all kept their drilling and development plans very much intact while reducing debt markedly. That’s left them in excellent shape to profit from the rebound in oil and natural gas liquids, as well as a future recovery in natural gas, despite the historic challenges of the past several years.

As for our 21 current Conservative Holdings, only Yellow Pages Income Fund (TSX: YLO-U, OTC: YLWPF) was forced by the credit crunch/recession to cut its distribution. And while others have reduced payouts to absorb 2011 taxation, the magnitude of the cuts has been far less than what was already priced into their shares, a fact made clear by the rallies we’ve seen following conversion announcements.

Like fourth-quarter 2009 earnings before them, first-quarter earnings confirm once again the underlying business strength of Canadian Edge Portfolio recommendations. I presented results for roughly half the Aggressive and Conservative Portfolio picks in May’s Portfolio Update. Below I highlight results from several others.

Note that two recommendations have begun paying dividends as corporations. One is Innergex Renewable Energy (TSX: INE, OTC: INGXF) at the annualized rate of CAD0.58 per share, with a scheduled pay date of Jun. 28, 2010. Future payments will be quarterly with disbursements due in March, September and December.

The other is Daylight Energy (TSX: DAY, OTC: DAYYF), formerly Daylight Resources Trust, which will now pay at a monthly rate of CAD0.05 per share. Buy Innergex Renewable Energy up to USD12, Daylight Energy up to USD11.

Bird Construction Income Fund (TSX: BDT-U, OTC: BIRDF) has already announced plans for a no-cut conversion to a corporation later this year. That wasn’t a real surprise, given the strength of the trust’s underlying business, which thrived last year even as major construction projects in Canada’s private sector have shut down.

First-quarter results again showed weakness in certain areas of the company’s business, chiefly in the oil sands region, where plans by producers are robust but immediate action has been slowed for some months. The three monthly distributions of CAD0.15, however, were covered by more than 2-to-1 by net income per unit of CAD1.03. CEO Paul Rabard states “the strong financial performance of the fund was partially based on the execution of contracts relating to infrastructure projects and demonstrates a leadership position that we are developing in this market.” Further, he notes that “we are now beginning to see some signs of a recovery.”

The key barometer of Bird’s future earnings is order backlog, which is now a healthy CAD844 million, not including government contracts that added CAD175 million in April. This ability to win public sector contracts continues to keep business solid, even as the company awaits the inevitable rebound of private sector sales.

Bird has been a huge winner since we added it to the Conservative Holdings in December 2008, but there’s still a lot more upside in the company that dominates its infrastructure construction niche. Buy Bird Construction Income Fund any time it trades at USD33 or lower.

Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF) reported a 1.6 percent up-tick in first-quarter operating revenue. Normalized funds from operations (NFFO), which excludes the effects of financial instruments and other non-recurring expenses, rose to CAD20 million (CAD0.30 per unit) from CAD16.5 million (CAD0.25 per unit) a year ago. The payout ratio based on NFFO was 93.3 percent, down from 111.3 percent for the first quarter of 2009.

Net operating income (NOI) was up 9.8 percent, while NOI margin increased to 52.2 percent from 48.3 percent. Average monthly rents increased by 1.8 percent, with steady increases in all markets except Alberta. Occupancy increased to 97.8 percent from 97.3 percent at the end of the first quarter of 2009.

Total debt-to-gross book value was 63.22 percent at quarter’s end, well below the 70 percent upper bound established by the REIT’s trust declaration but up slightly from 62.75 percent at Dec. 31, 2009.

Subsequent to quarter’s end CAP REIT announced the purchase of a 162-suite luxury apartment building in British Columbia for CAD37.5 million, funded by the assumption of a CAD22.7 million, 4.59 percent first mortgage and from existing credit facilities. Management has also inked a deal to buy another luxury apartment property comprising 199 suites outside Toronto for CAD31 million; the REIT will assume a CAD23.3 million first (it didn’t disclose the rate) and put the rest on its credit facility.

In addition, CAP REIT is selling a 146-suite property in Ontario for CAD7.6 million; net proceeds, expected be about CAD1.5 million, will be used to pay down debt. Canadian Apartment Properties REIT is a buy up to USD15.

Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF) posted distributable cash flow per share of CAD0.47, a quantum leap above last year’s CAD0.31. That’s not only a huge vote of confidence for the monthly distribution of CAD0.10 per share. It’s also a very good sign that the company’s global niche chemicals business has stabilized and is again turning up.

Sales of its key products sodium chlorate, liquid sulfur dioxide, sodium hydrosulfate and phosphorus pentasulfide are all vulnerable to drops in industrial demand. All showed signs of strengthening in the quarter, as did the core business of processing spent acid in the US Gulf Coast region. Customers worldwide ran at improved rates of capacity, including Vale Inco which has been plagued by strikes. The company’s Beaumont plant is also running well now, helping the enterprise to cut costs overall.

The extension of long-term deals with Canfor Pulp’s (TSX: CFX, OTC: CFPUF) plants in British Columbia and Guangdong ZhongCheng Chemicals are other huge pluses for the trust, which derives only 21.2 percent of its sales from Canada, making it impervious to trust taxes whether it converts to a corporation or not.

A great play on faster global growth that’s proven its ability to weather gripping recessions, Chemtrade Logistics Income Fund is a solid buy up to USD13 for those who don’t already own it.

Macquarie Power & Infrastructure Income Fund (TSX: MPT-U, OTC: MCQPF) reported a 9.6 percent increase in revenue, reflecting higher power rates at the Cardinal cogeneration facility, back-to-normal performance at Whitecourt after maintenance downtime hampered the prior year’s first-quarter tally and higher water flows at hydro facilities offset lower-than-average wind speeds at the Erie Shores wind farm.

The fund also realized a net cash gain of CAD50 million from its sale of its 45 percent interest in the Leisureworld long-term care facility. In the words of CEO Michael Bernstein, “The fund is now well positioned to pursue growth in core infrastructure categories such as power generation, distribution and transmission, and utilities and transportation.”

Revenue for the first quarter was CAD44.2 million, up from CAD40.3 million a year ago, largely on a 1.6 percent increase in electricity output. The Whitecourt biomass facility posted fewer outage hours, while favorable hydrology offset unfavorable wind conditions. In addition, the Cardinal cogeneration facility received higher prices under its PPA and a CAD1.8 million rate adjustment from Ontario.

Distributable cash for the quarter was CAD14.7 million (CAD0.295 per unit), down slightly from CAD15 million (CAD0.30 per unit) because of the Leisureworld transaction and higher administrative and interest expenses. The fund declared distributions of CAD8.2 million (CAD0.165 per unit), down from CAD13.1 million (CAD0.262 per unit), for a payout ratio of 56 percent.

Management “expects to maintain stable distributions to unitholders of CAD0.66 per unit through 2014 based on its current portfolio. This distribution level is expected to result in an average payout ratio of approximately 70 to 75 percent of distributable cash over a five-year period. As a result of the divestment of Leisureworld, the 2010 payout ratio is anticipated to be above 80 percent.” Macquarie Power & Infrastructure Income Fund is a buy up to USD8.

Newalta (TSX: NAL, OTC: NWLTF) doesn’t pay much of a dividend at this point, the consequence of converting to a corporation when the core business of recycling industrial and energy waste was under extreme pressure. But the company’s patient cost cutting and continued expansion within its unique niche are starting to pay off in a very big way.

First-quarter cash flow–as measured by adjusted EBITDA (earnings before interest, taxes, depreciation and amortization)–was up 145 percent over the last 12 months to CAD28.9 million. Management estimates 61 percent of that improvement was due to stronger activity from its assets combined with reduced costs. The remaining 31 percent was due to higher prices for the company’s recycled products, which are chiefly commodities like oil.

Newalta now derives earnings from three major sources. Eastern operations (22 percent of revenues) are mostly industrial; Western operations (47 percent) are mainly connected with the energy business, including oil sands; and the Ville Ste Catherine battery recycling facility. All three posted solid results in the first quarter. The company’s facilities-based operations enjoyed a 19 percent boost in revenue and a 105 percent increase in margins, thanks in large part to rising landfill volumes.

Meanwhile, the company’s revenue from services provided onsite of major plants and drilling locations increased revenue by 11 percent and boosted margins by 100 percent. One reason I’ve stuck with Newalta throughout its economically sensitive ups and downs has been management’s continued ability to invest in growth, regardless of the overall environment. The company didn’t disappoint me in the first quarter, spending another CAD5.6 million on growth projects out of a projected CAD60 million in 2010. For example, Newalta is now exceptionally well positioned to serve three of the continent’s fastest-growing shale gas and oil areas, including Bakken, Montney and Cardium.

Funds from operations tripled in the quarter to CAD0.48 a share, covering the CAD0.05 quarterly distribution by nearly a 10-to-1 margin. That leaves plenty of room for growth as Newalta’s projects ripen and the Canadian economy picks up steam. Buy resurgent Newalta up to USD10 if you haven’t yet.

Northern Property REIT (TSX: NPR-U, OTC: NPRUF) reported that conditions continued to improve across four of its five operating regions during the first quarter, and according to CEO Jim Britton, “We are now beginning to see some steady improvement in northern Alberta as oil patch activity picks up.”

Total revenue for the period was CAD33.9 million, down slightly from CAD34 million a year ago. NOI was CAD20.8 million, down from CAD21.3 million, while FFO was CAD12.7 million compared to CAD13.5 million. Northern reported a first-quarter payout ratio of 74.3 percent, up from 69.6 percent a year ago.

Northern began to observe an improvement in multi-family rental conditions during the fourth quarter of 2009, and this trend continued into 2010. While overall apartment vacancy declined to 7.3 percent from 8.7 percent at December 31, it’s still above the 6.1 percent recorded at the end of the first quarter of 20009. Northern Property REIT is a buy up to USD22.

Paramount Energy Trust (TSX: PMT-U, OTC: PMGYF) came in with a first-quarter payout ratio of just 22.7 percent, thanks to the close-out of several very profitable hedge positions. That cash enabled the company to invest in growth as well as continue to pare back debt, down 11 percent year over year.

The key going forward remains hedging, as gas prices remain very weak. Production rose 2 percent sequentially in the first quarter but is down 10.7 percent from year-earlier levels, due to  combination of voluntary shut-ins of output in the face of lower prices, the sale of various non-core properties for cash and otherwise  restricted capital spending in 2009. That was offset partially by the acquisitions of Profound Energy and properties and Ukalta, as well as the development of West Central assets.

The company now expects output to be generally flat in 2010 from these levels and has spelled out several scenarios for its output, payout ratio and end-year debt based on projections of natural gas prices and its ability to hedge them. The bad news is natural gas prices are still very much a part of how much Paramount will be able to pay in dividends as a corporation when it converts in late 2010/early 2011. The good news is even at an average price of CAD4 per thousand cubic feet on the key AECO hub, it will be able to cut debt, maintain production and cover its current distribution by more than a 2-to-1 margin.

That’s a very good sign despite the weakness of natural gas prices and, coupled with the high current yield, remains a good reason to hold Paramount as an aggressive bet on natural gas. Note management has pledged to maintain the same distribution after converting to a corporation as it pays now. These numbers at least enforce its ability to do so. Buy Paramount Energy Trust up to USD6 if you haven’t yet.

What to Watch

Here are the rest of the expected reporting dates for CE Portfolio companies. I’ll be updating results from more reporters later in the week as I digest them.

Conservative Holdings

• Artis REIT (TSX: AX-U, OTC: ARESF)–May 12
• Atlantic Power Corp (TSX: ATP, OTC: ATLIF)–May 14
• Brookfield Renewable Power Fund (TSX: BRC-U, OTC: BRPFF)–May 12
• Innergex Power Income Fund (TSX: IEF-U, OTC: INRGF)–May 13
• Just Energy Income Fund (TSX: JE-U, OTC: JUSTF)–May 14
• Keyera Facilities Income Fund (TSX: KEY-U, OTC: KEYUF)–May 11

Aggressive Holdings

• Ag Growth International (TSX: AG-U, OTC: AGGZF)–May 17
• Peyto Energy Trust (TSX: PEY-U, OTC: PEYUF–May 13
• Provident Energy Trust (TSX: PVE-U, NYSE: PVX)–May 13
• Trinidad Drilling (TSX: TDG, OTC: TDGCF)–May 12

The following Canadian Edge Portfolio picks have yet to announce or implement post-conversion dividend policies. Provident Energy Trust (TSX: PVE-U, NYSE: PVX) is the only one yet to report earnings as of this Flash Alert. Daylight Energy (TSX: DAY, OTC: DAYYF) has now converted to a corporation. Management has yet to define its post-conversion distribution policy but we’ll be finding out very soon as another payout is due imminently. Stay tuned.

• ARC Energy Trust (TSX: AET-U, OTC: AETUF)
• CML Healthcare Income Fund (TSX: CLC-U, OTC: CMHIF)
• Daylight Resources Trust (TSX: DAY-U, OTC: DAYYF)
• IBI Income Fund (TSX: IBG-U, OTC: IBIBF)
• Penn West Energy Trust (TSX: PWT-U, NYSE: PWE)
• Provident Energy Trust (TSX: PVE-U, NYSE: PVX)

Finally, the following CE Portfolio companies have never once cut dividends. Note that CML Healthcare Income Fund (TSX: CLC-U, OTC: CMHIF) and IBI Income Fund (TSX: IBG-U, OTC: IBIBF) have yet to declare post-conversion dividend policies. For their first-quarter earnings, see the May Portfolio Update.

• Ag Growth International (TSX: AFN, OTC: AGGZF)
• Artis REIT (TSX: AX-U, OTC: ARESF)
• Atlantic Power Corp (TSX: ATP, OTC: ATLIF)
• Bird Construction Income Fund (TSX: BDT-U, OTC: BIRDF)
• Brookfield Renewable Power Fund (TSX: BRC
• Canadian Apartment Properties REIT (TSX: CAR, OTC: CDPYF)
• CML Healthcare Income (TSX: CLC-U, OTC: CMHIF)
• Colabor Group (TSX: GCL, OTC: COLFF)
• IBI Income Fund (TSX: IBG-U, OTC: IBIBF)
• Just Energy Income Fund (TSX: JE-U, OTC: JUSTF)
• Keyera Facilities Income Fund (TSX: KEY-U, OTC: KEYUF)
• Northern Property REIT (TSX: NPR-U, OTC: NPRUF)
• Pembina Pipeline Income Fund (TSX: PIF-U, OTC: PMBIF)
• RioCan REIT (TSX: REI-U, OTC: RIOCF)
• Vermilion Energy Trust (TSX: VET-U, OTC: VETMF)