Five more Canadian Edge Portfolio holdings have announced second-quarter 2010 results. The good news: more solid numbers that affirm these companies’ financial health, distribution safety and growth potential.

That’s to some extent already reflected in their share prices, which are either at or have recently made new post-2008 crash highs. But all still feature considerable upside and remain solid buys for those who don’t already own them.

Importantly, all five have also either converted to corporations already–in the case of Atlantic Power Corp (TSX: ATP, NYSE: AT)–or have stated their intention to do so and what their post-conversion dividends will be. For Atlantic Power, Bird Construction Income Fund (TSX: BDT-U, OTC: BIRDF), Brookfield Renewable Power Fund (TSX: BRC-U, OTC: BRPFF) and Vermilion Energy Trust (TSX: VET-U, OTC: VETMF), conversion will come without accompanying dividend cuts. In fact, Brookfield Renewable has actually raised its payout 4 percent since announcing its intention to convert.

Macquarie Power & Infrastructure Income Fund (TSX: MPT-U, OTC: MCQPF) has already adjusted its distribution for corporation conversion and won’t be making a further cut.

None of these recommendations carry any 2011 risk. All have traded on the merits of their underlying businesses and dividend safety for several months now and will continue to do so going forward.

That’s very good news for Atlantic Power, which reported solid second-quarter operating results and extended its “worst case” for being able to maintain the current dividend rate into 2016. US investors aren’t used to seeing dividend safety expressed this way, as companies rarely admit there’s any “worst case” to their future results.

Atlantic is able to do it because of an extraordinary degree of transparency and predictability about future results. The vast majority of cash flow comes from ownership stakes in power plants that sell output under long-term contracts, almost entirely to utilities. The rest is from fees paid by utilities to the Path 15 power line traversing Northern and Southern California.

There’s never been a default of a regulated utility on a contract to an independent power producer. The company also hedges risk of volatility in commodity prices, interest rates and exchange rates–important because dividends are paid in Canadian dollars and cash flows are earned in US dollars.

The extension of the worst-case dividend payout to 2016 reflects the acquisition of a 27.6 percent stake in Idaho Wind Partners, a 183 megawatt (MW) project that will sell all of its output to Idaho Power when completed later this year. The investment is expected to add CAD4.5 million to CAD5.5 million a year to cash flow every year and reduces Atlantic Power’s expected 2011 payout ratio to the 80 to 90 percent range from around 100 percent forecast for 2010.

Looking out further, I fully expect Atlantic to expand its portfolio of projects, further pushing out the worst case date for the dividend to the end of the decade and beyond. In the meantime, these results and the Idaho Wind Partners investment have earned Atlantic Power Corp a boost in my buy target to USD13. Note that all investors who owned the stock though the five-letter over-the-counter (OTC) symbol ATLIF should now own it through the New York Stock Exchange (NYSE) listing AT.

Bird Construction’s earnings per share again lagged 2009 levels in the second quarter due to lower expenditures in the private sector, particularly in the Alberta oil sands. The company’s order backlog, however, is again on the rise, thanks to being able to replace the business in the public sector and a now noticeable recovery in the corporate sector. Backlog, which is the best indicator of future revenue, rose to more than CAD1 billion at the end of the second quarter, up from CAD844 at the end of the first quarter and CAD901 at the beginning of 2010.

Construction revenue slipped 11.4 percent for the six months of 2010 versus 2009. Income, however, again covered the distribution by well over a 2-to-1 margin. The nature of the construction business requires Bird maintain sizeable liquidity balances, which it increased to CAD139.8 million at the end of the second quarter, with no long-term debt. Consequently, there’s no possibility of capital requirements or credit pressures posing a threat to dividends.

Ultimately, Bird’s success or failure depends on securing new contracts to replace those it completes. Its strong performance during the recession and management’s increasingly bright outlook point the way to rising earnings over the next several years. Coupled with conservative financials, that’s a great deal of security for the current dividend.

Management has affirmed it will convert to a corporation at the end of its fiscal year (Dec. 31, 2010), with the only change being a switch from a monthly rate of CAD0.15 per unit to an equivalent quarterly payout of CAD0.45 per share. Buy Bird Construction Income Fund up to USD33.

Brookfield Renewable’s mostly hydroelectric power plants generated somewhat less energy than a year ago, owing to water flows in Ontario and Quebec that were well below average. Despite 219 gigawatt hours (GWh) of generation from newly acquired facilities, total output came in at just 993 GWh versus 1,149 GWh a year ago and a long-term average of 1,627 GWh.

Despite the shortfall, however, overall revenue held steady, thanks to the nature of the company’s power sales contracts. Wind generation, for example, was also less than expected. But Brookfield Renewable maintained a 98 percent operating rate and enjoyed the benefit of “wind levelization” agreements that maintain cash flow in all but the most extreme conditions. The company also has a “guaranteed” rate built into two of its hydro contracts.

Income before non-cash items did drop, owing to expenses from a wider range of assets from a year ago. That pushed the company’s second-quarter payout ratio to 183 percent versus roughly 50 percent a year ago. Six-month income, however, still covered the dividend by a 1.08-to-1 margin.

And there are no credit pressures, with the next significant debt maturity slated for 2023. The Gosfield Wind project is on schedule for startup this fall, with all access roads, substation entrance structures and turbine foundations completed and all equipment delivered with installation in progress. That will produce more income that’s resistant to changeable hydro conditions.

As for the water, that’s always been a part of doing business at Brookfield Renewable. But one season’s abysmally low flows are usually the next’s high water. And management is well prepared for the ups and downs, thanks to conservative financial policies and solid reserves to make up for the periodic shortfalls.

The upshot is nothing has changed at Brookfield Renewable and its exceptionally solid portfolio of carbon-neutral power production assets. Corporate conversion is slated for later this year, with the company maintaining its current payout rate after the switch. And expansion will continue on its rich portfolio of water and wind assets.

The only problem may be getting it again under USD20. But Brookfield Renewable Power Fund is a buy anytime it trades below that price.

Macquarie Power & Infrastructure isn’t nearly as dependent on water and wind as Brookfield Renewable and so was able to post somewhat steadier results in what’s historically been a seasonally weak quarter. Electricity production rose 7.4 percent, keying an 8.9 percent boost in revenue. The company experienced fewer maintenance outages at its Cardinal gas cogeneration (93.6 percent availability) and Whitecourt biomass (93.3 percent availability) power plants, which offset decreased output at the Erie Shores Wind Farm.

Distributable cash flow took a hit, the result of Macquarie’s sale of its minority interest in the Leisureworld retirement community. The payout ratio hit 151 percent in the second quarter. The year-to-date tally, however, is still just 84 percent. Moreover, cash equivalents are up by 23.8 percent since the beginning of the year, underscoring a sound financial position backed by a portfolio of steady performing assets.

As management has stated, the loss of the Leisureworld revenue will continue to impact income until the proceeds are reinvested in other infrastructure projects. One of these is an Ontario solar power facility that will sell output under a lucrative long-term contract to the Ontario Power Authority and will begin producing cash flow in mid-2011.

Meanwhile, management maintains “operating cash flow is expected to be higher in 2010 than in 2009” and is sticking to its forecast of a payout ratio of 70 to 75 percent over the next five years. It’s also begun issuing long-term dividend projections similar to Atlantic Power’s, stating that “based on the Fund’s current portfolio the new distribution policy of 66 cents per unit annually is expected to be sustainable through 2014.” And like Atlantic Power’s 2016 forecast, Macquarie’s will be extended into the future as the company adds more projects that are accretive to cash flow.

The units have traded in a very tight range the past several months. That’s likely due in parts to lingering concerns about 2011 and the fund’s transition to more of a pure power play, from both a cost and reinvestment standpoint. Management, however, has pledged to maintain its current payout rate after conversion. And as long as the company’s transition continues to go well, there’s little risk to the current dividend rate of nearly 10 percent.

I’ll be watching third-quarter results for a rebound, as the summer generally brings higher output and income from Macquarie’s power plants. At this point, however, Macquarie Power & Infrastructure Income Fund remains a high-yielding buy up to USD8.

Vermilion Energy Trust posted record production in its second quarter, a sequential gain of about 5 percent from the first quarter. Funds from operations per share came in at CAD1.03, a sequential gain of 14.4 percent, and distribution coverage was again very solid at nearly 2-to-1. Second-quarter results also topped Bay Street expectations by a wide margin. Meanwhile, net debt was cut to just 0.51 times annualized cash flow, the lowest ratio in the business.

Output gains were largely the result of expanded gas drilling efforts in the Netherlands and France, as well as successes in the Cardium light oil trend in Canada. That offset the impact of temporary disruptions in Australia, though new drilling should boost production there later this year.

The company’s biggest project by far remains the Corrib Field off the Irish coast, a project in which it has an 18.5 percent ownership stake. The partners are currently requesting Irish regulators’ approval to construct an onshore pipeline to connect Corrib’s offshore pipeline to a processing plant. Hearings will begin later this month. Meanwhile, the partners are engaged in other drilling that could “significantly extend the life of the Corrib platform” and boost the profitability of the project.

Corrib is still expected to give a huge 25 to 30 percent lift to Vermilion’s output starting in last 2012, and relatively stable output for at least two to four years after. Even without it, however, the producer should be able to easily reach its goal of growing output at least 5 percent a year–without the need to issue additional equity. And management has again affirmed it will maintain distributions at the current monthly rate of CAD0.19 per share when it converts to a corporation on Sept. 1, 2010. At that point, those who hold Vermilion in an IRA will no longer be subject to the 15 percent Canadian withholding tax, receiving in effect a dividend boost of 17.6 percent.

Still well off its mid-2008 high of nearly USD45–a level it should easily revisit as the global economy continues to recover–Vermilion Energy Trust is a buy up to USD33 for those who don’t already own it.

Still to Come

The most important takeaway from these companies’ second-quarter results–as well as those previously reported–is that the health of strong businesses continues to improve. Takeaway two is balance sheets continue to strengthen, as management uses spare cash to pay down debt and takes advantage of the lowest corporate interest rates in 40 years to eliminate refinancing risk and cut costs.

Takeaway three is that conversions to corporations continue to come off without a hitch. All recommendations reporting numbers also affirmed conversion plans were on track, with no changes to what had been previously reported. Finally, management universally stuck to guidance for 2010 and beyond, while affirming growth plans are in place.

As long as these takeaways hold true, I’m comfortable sticking with all of my favorites, no matter how volatile the market acts the rest of this year and whether the worry du jour for investors from 30,000 feet is inflation, deflation, a dollar crisis, a double-dip recession, taxes or anything else.

Again, my discipline remains that if there are real signs of weakening at the companies themselves, we’ll be out and looking for something else. Here’s when the rest of the CE Portfolio is expected to report. I’ll be bringing what’s important to you in subsequent Flash Alerts, with the next slated for Friday.

Aggressive Holdings

• Ag Growth International (TSX: AFN, OTC: AGGZF)–August 11 (confirmed)
• Parkland Income Fund (TSX: PKI-U, OTC: PIKUF)–August 13 (confirmed)
• Perpetual Energy (TSX: PMT, OTC: PMGYF)–August 20
• Peyto Energy Trust (TSX: PEY-U, OTC: PEYUF)–August 12
• Provident Energy Trust (TSX: PVE-U, NYSE: PVX)–August 11 (confirmed)
• Trinidad Drilling (TSX: TDG, OTC: TDGCF)–August 11 (confirmed)                  

Conservative Holdings

• Artis REIT (TSX: AX-U, OTC: ARESF)–August 11 (confirmed)
• Canadian Apartment (TSX: CAR-U, OTC: CDPYF)–August 11 (confirmed)
• Cineplex Galaxy (TSX: CGX-U, OTC: CPXGF)–August 12 (confirmed)
• CML Healthcare Inc (TSX: CLC-U, OTC: CMHIF)–August 12 (confirmed)
• Davis + Henderson Income Fund (TSX: DHF-U, OTC: DHIFF)–August 11 (confirmed)
• Innergex Renewable Energy (TSX: INE, OTC: INGXF)–August 12 (confirmed)
• Just Energy Income Fund (TSX: JE-U, OTC: JUSTF)–August 12 (confirmed)