A dozen more Canadian Edge Portfolio recommendations have reported since my last Flash Alert. Below, I highlight what shareholders need to know about each. I’ll be analyzing them further in the September issue.

The good news is the takeaways are the same as they’ve been for every other company that has reported. They are: health of strong businesses continues to improve; 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; conversions to corporations are universally coming off without a hitch; and management is sticking to prior guidance and affirming growth plans.

My discipline remains this: 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. Only if there are real signs of weakening at the companies themselves will I get out.

Here are the numbers, starting with the Conservative Holdings. Note that Parkland Income Fund (TSX: PKI-U, OTC: PIKUF) will release its results after the close today. We’ll wait to update, however, until after the Monday conference call.

Artis REIT (TSX: AX-U, OTC: ARESF) boosted its second-quarter 2010 revenue 28.4 percent, triggering a 30.3 percent increase in property net operating income (NOI). NOI is the best measure of property profitability for REITs. Meanwhile, the account from which dividends are paid–funds from operations (FFO)–rose 18.4 percent.

Breaking down the numbers, portfolio occupancy rose to 97.1 percent from 96.2 percent at the end of the first quarter. Management slashed mortgage debt to 46.9 percent of book value, versus 47.4 percent at the beginning of 2010. The company boosted its “acquisition capacity” to more than CAD100 million and continued to successfully execute purchases of first rate properties at distressed prices.

The diversified owner of commercial property in western Canada did take advantage of its recovering unit price to issue equity. Much of that money is still in reserve to finance acquisitions, and is therefore dilutive. As a result, per share distributable income fell 23 percent from year earlier tallies. The payout ratio, however, remained a well-behaved 87.1 percent. And as the funds are deployed, profits will rise and the payout ratio will decline.

Artis also continues to make progress cutting portfolio risk by diversifying outside its home province of Alberta, where the commercial property market remains weak. And even there it continues to enjoy strong renewal activity for existing leases, with a robust 6.7 percent increase in rents thus far in 2010. No single tenant now accounts for more than 4.4 percent of overall revenue.

Looking ahead, Artis’ profits are set to rise as it invests its sizeable cash hoard and as the western Canada commercial property market continues to tighten. Units recently made a post-2008 crash high but are still a third below its level of late 2007, when it was arguably a much less valuable REIT. That leaves a lot of upside for Artis’ unit price, in addition to its yield of more than 9 percent. Recent strengthening of Canada’s energy patch is a good sign. Buy Artis REIT up to USD12 if you haven’t yet.

Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF) turned in what management described as “sustainable increases in net operating income,” which, in turn, triggered solid 8.3 percent growth in FFO per unit, the account from which distributions are paid. Net operating margin, the best measure of REITs’ profitability, surged to 59.4 percent from 57.1 percent a year ago. The second-quarter payout ratio, meanwhile, dropped to 73.8 percent.

The first cornerstone of any REIT’s profitability is high occupancy; CAP REIT pushed its rate to 98 percent in the second quarter, up from 97.5 percent a year ago. The second is rent growth, which rose 2.6 percent for the owner of residential properties across Canada. The third is strong finances, which the REIT has strengthened by taking advantage of low interest rates to refinance and renew credit deals on very favorable terms.

This firm foundation has allowed CAP REIT to be aggressive acquiring high-quality properties from distressed owners. It’s also enjoyed a high level of success slashing costs, driving operating expenses as a percentage of revenue down to just 40.6 percent in the second quarter from 44 percent a year ago. The weighted average interest rate realized by the REIT’s refinancing activity last quarter is now just 3.58 percent, significantly below the 4.89 percent for maturing mortgages. And there’s a lot more opportunity for further cuts the next three years, as well as to extend loan maturities.

Despite volatile conditions, management reported the 18th consecutive quarter for the REIT of stable to improved NOI growth. That’s a record that should make shareholders very comfortable going forward, as conditions improve across Canada. The REIT reported solid growth in Ontario, Quebec, Halifax and British Columbia during the quarter, with only Alberta lagging. I expect more action in the west to fire up growth further in the second half of 2010. We may have to wait a while longer for the REIT’s first dividend increase since 2003. But Canadian Apartment Properties REIT remains a buy up to USD15.

Cineplex Galaxy Income Fund (TSX: CGX-U, OTC: CPXGF) topped headline earnings per share (EPS) estimates for its second quarter. Revenue slipped 2 percent on an 8.2 percent drop in attendance, however, that management blamed on a less than stellar opening to summer movies season. That knocked down distributable cash flow (DCF) per share by 12.6 percent to CAD0.54 per share from last year’s CAD0.628.

On the positive side, the payout ratio was still just 57.4 percent, a tribute to the company’s conservative financial policies and backing up management’s plans to hold dividends at current levels when Cineplex converts to a corporation. That’s still set for Jan. 1, 2011, subject to a unitholder vote slated for the fourth quarter.

Cineplex’ results depend on a large extent on the ability of Hollywood and other movie-making centers to churn out popular content. And as this quarter shows, that’s not always guaranteed. The good news is there’s plenty of cushion for the payout when the season is worse than anticipated. And, equally important, the company is always in good shape to capitalize when there’s a blockbuster with its ever-expanding asset base of state-of-the-art venues and efficiencies.

Among the bright spots in the second quarter was a 6.6 percent boost in concession revenue per patron over last year’s level, the fund’s best ever. Cineplex Media revenue rose 18.6 percent on increased “full motion” advertising. The company continued to install digital and 3D projection systems, which are at 21 percent and 17 percent of screens, respectively. Coupled with installation of new sound systems, that’s kept the company well ahead in the technology game, key to maintaining and growing its younger audience in particular.

That augurs well for the rest of the year, when a new Harry Potter movie is due out, among other fare. There are no refinancings until 2012, when the company’s 6 percent convertible note comes due Dec. 31, as growth is financed with cash flow.

Buy Cineplex Galaxy Income Fund up to USD20 for safe growth and income if you haven’t yet.

CML Healthcare Income Fund (TSX: CLC-U, OTC: CMHIF) announced solid second-quarter earnings and set its initial post-conversion dividend rate at CAD0.0629 per share. That’s a 29.5 percent reduction from the current rate of CAD0.08927, which management intends to keep in place for the remainder of 2010.

The new rate equates to a yield of roughly 7.5 percent based on CML’s current price and was somewhat better than investors had priced in, judging from the rebound in the units following the announcement. The conversion is on a one-share-per-one-unit basis and won’t be a taxable event.

The new distribution rate is also something of a vote of confidence in the prospects of the owner and operator of medical testing facilities. Second-quarter revenue was off 10.6 percent, triggering an 11.2 percent dip in cash flow, as operating margin was stable. That diminished DCF for the quarter by 5 percent, and pushed the payout ratio up to 103.9 percent from last year’s 98.6 percent.

One reason for the shortfall in revenue was a new management service agreement at CML’s US medical imaging operations, which pegs fees more closely to revenue. That’s expected to have only a temporary impact and it does not impact net earnings. Meanwhile, the company posted much improved profit margins in the US, from 2.7 percent in the first quarter to 11.1 percent in the second.

That’s a good sign problems reported with these operations in past quarters have been resolved and that the company is returning to growth. However, future results in the US will continue to be impacted by lower reimbursements from Medicare due to US health care legislation, as well as still “challenging” market conditions in radiology. Second-quarter physician referrals in the US, for example, were off 4.6 percent from year earlier levels, in large part due to continued high unemployment, which has left many without insurance coverage. And management doesn’t expect “significant” improvement in conditions at least in the near future.

Long term, despite the current setbacks, the US offers stellar growth opportunities for CML. In fact, volumes improved in all states except Connecticut. Canadian operations, meanwhile, provide a steadily growing base of revenue and profit. The second quarter was the 8th consecutive reporting period of “positive organic growth” in the home country. And management continues to spot new opportunities, such as the successful Calgary Women’s Imaging Centre.

Debt is well under control, with no significant maturities until 2013. Setting a post-conversion distribution rate has eliminated 2011 uncertainty, while leaving sufficient liquidity to pay taxes and fund growth, primarily through what management called in its conference call “accretive tuck-in acquisitions.” The upshot is, despite recent price declines, CML is still a solid high-income play on the very stable Canadian health care market and potential rationalization in the US. CML Healthcare Income Fund is still a buy up to USD12 for those who don’t already own it.

Davis + Henderson Income Fund (TSX: DHF-U, OTC: DHIFF) posted second-quarter earnings with few, if any, surprises. Revenue jumped 78.4 percent versus year-earlier tallies, as the company continued to enjoy the benefit of expanding services and acquisitions. Cash flow rose at a slightly slower but still robust 32.7 percent pace, mainly because many of the new services contribute lower margins as a percentage of revenue.

Adjusted net income per unit surged 5.1 percent, as a 27.4 percent jump was affected by equity issues to finance growth. The payout ratio, however, was again a very well-covered 71.2 percent. And management noted “stronger volumes related to lending markets and from program enhancements” as reason to expect solid results ahead.

Like many investors, I was somewhat irked by management’s decision earlier this year to cut its distribution to an annualized rate of CAD1.20 from the current CAD1.84 per unit, when it converts to a corporation Jan. 1, 2011. I stuck with Davis because I viewed that as a bottom for the distribution, as management continued to grow the underlying business.

That remains my view now, and it’s why I continue to recommend the units in the Conservative Portfolio. The post conversion yield is still attractive at 7 percent, particularly as it will no longer be subject to 15 percent Canadian withholding if held in a US IRA account. The Canadian banking system remains extremely healthy and growing conservatively, and this is a solid, low-risk way to share in its growth.

Buy Davis + Henderson Income Fund up to USD17 if you haven’t yet.

Innergex Renewable Energy (TSX: INE, OTC: INGXF) boosted second-quarter cash flow 38.2 percent. The key was the merger of the former income trust with its operator earlier this year, which boosted overall output by 49.2 percent. Other highlights included 75 megawatts (MW) of power sales contracts and the startup of construction on wind farms totaling 103 MW of capacity, which will spur future cash flows.

Generation was lower than what management had expected, due to unfavorable water flows. Coupled with higher expenses in the wake of the merger, this pushed down earnings, though adjusted cash flows from operating activities–the account from which dividends are paid–rose 9.5 percent over 2009 levels. That pushed the payout ratio down to just 65.2 percent for the quarter and 69.8 percent year to date.

When it announced the merger of the former Innergex Power Income Fund with Innergex Renewable Energy, management promised a period of strong growth as it developed massive potential hydroelectric resources. It also warned that the process would be capital intensive, and that it could be several years before dividend growth resumed.

These results basically confirm that forecast, as well as the fact that the company remains focused and financially strong. The next significant debt maturity is in 2013 and 95 percent of obligations are at fixed rates. The company is likely to borrow more going forward as it brings new projects on line. But generation, cash flow and earnings growth are firmly on course for solid growth. Innergex Renewable Energy continues to rate a buy up to USD10.

Just Energy Income Fund (TSX: JE-U, OTC: JUSTF) reported record customer additions in its fiscal first quarter 2011. The impact on margins and DCF was masked by record warm weather and the cost of investing in growth. That pushed the payout ratio to 173 percent for the quarter, traditionally a seasonally weak period for sales.

Management affirmed its full fiscal year target of having distributable cash cover the payout with a margin to spare, pointing among other things to the success of geographic diversification efforts. The US business is now larger than the Canadian operation, a major factor enabling the company to convert to a corporation without cutting its distribution, slated for Jan. 1, 2011.

The purchase of Hudson Energy this year also tilted the business mix further toward the commercial market, which has lower customer attrition rates and costs than the residential market. Meanwhile, the growth of the JustGreen offering is also producing improved margins that will increase further with the return of more seasonal weather. National Home Services–which rents high-efficiency and tankless water heaters, air conditioners and furnaces–is generating steady, less weather-sensitive income. And the Terra Grain Fuels unit producing wheat-based ethanol is benefitting from government mandates to use the fuel.

Just Energy’s current target remains to boost total customers served on both sides of the border to 5 million-plus from the current 3 million. Reaching that will depend on continuing to offer a high-quality service as well as openness of markets. Management must also successfully hedge its exposure to factors beyond its control, such as commodity prices and exchange rates.

With the bulk of income earned in the winter quarters (the third and fourth), the first quarter is not an ideal time to gauge its success. But customer growth of 84 percent the past 12 months and a 30 percent increase in capital spending over last year’s levels augur improved results the rest of the year, even if weather remains unseasonably mild. Further, bad debt expense and debt levels are on target, with only CAD36 million in debt maturities until 2014.

Despite the first-quarter shortfall, this is still a very solid company with a yield of 9.5 percent. Just Energy Income Fund is a buy up to USD14 for those yet to buy in.

Aggressive Holdings

Ag Growth International’s (TSX: AFN, OTC: AGGZF) second-quarter sales rose 8.3 percent over last year’s tally. Cash flow and earnings were basically flat after factoring out items relating to the company’s conversion to a corporation.

This year’s performance, however, came in the face of several challenges that didn’t exist last year, notably poor crop conditions in western Canada following a period of excessive moisture during the seeding period. Results were also impacted by violent action in the currency markets, which hit sales outside of Canada. Overall revenue would have risen 14 percent in the quarter, for example, factoring out the impact of the rising Canadian dollar.

The biggest ongoing positive for the company is robust demand for portable grain-handling equipment particularly in the US. Ag Growth expects to benefit from “another huge crop in the US” in the second half of the year as well as very strong international sales, though Canada will probably be another point of weakness. One very positive sign: The company’s sales backorder for commercial equipment is “significantly higher” than last year. And it should continue to benefit from the April acquisition of a Finland-based manufacturer of grain-drying systems.

Second-quarter distribution coverage with was again solid at nearly 3-to-1. The payout ratio of 36 percent of FFO is actually lower than last year’s 42 percent as well as the first half 2010 tally of 50 percent.

Meanwhile, bank debt has been reduced to zero and long-term debt has been cut by more than half over the past year to just CAD26.2 million, with no significant maturities until Oct. 29, 2016. Ag Growth also has CAD115 million in convertible debt due Dec. 31, 2014.

That adds up to an enviable financial position that provides solid flexibility for further expansion if desired, and without pressuring the balance sheet or monthly dividend. Maintenance capital expenditures are expected to total a bit over CAD3 million for full-year 2010, with CAD2.1 million already completed. Growth CAPEX has already tallied CAD10.8 million and is expected to “increase significantly” and be financed by existing funds, including CAD54.8 million of cash currently on the books.

Ag Growth’s reliance on the health of North American agriculture makes a solid play on the rapid growth of China’s dietary needs, a trend that will remain robust for years to come. Its dependence on demand for agricultural commodities and substantial US dollar income means earnings are potentially more cyclical than those of Canadian Edge Conservative Holdings, which is why it’s in the Aggressive group.

But Ag Growth has also proven its ability to hold a high dividend in an exceptionally difficult market for both commodities and currencies, thanks to cost-focused management and conservative financial policies. These should hold the company in good stead–come what may for the markets. Ag Growth International remains a buy up to USD36 for those who don’t already own it.

Perpetual Energy’s (TSX: PMT, OTC: PMGYF) hedging program was again front and center in its solid second-quarter results. The newly converted corporation produced 165.2 million cubic feet per day–95 percent natural gas–basically flat with levels recorded a year ago. That was despite sales of non-core properties for total proceeds of CAD35.2 million during the quarter.

The company, which continues to benefit from government compensation for shut-in reserves near oil sands development, also cut its operating costs 13 percent per unit of production. Those reflect company-wide cost reduction initiatives that are ongoing, offsetting a 39 percent decline in realized selling prices for natural gas.

Perpetual’s bottom line was FFO of CAD0.25 per share, adding up to a payout ratio of roughly 60 percent. The company doesn’t anticipate paying tax in 2010 thanks to numerous tax pools to offset future income. Those will continue to build in coming years as the company adds new assets and develops others.

Management has budgeted CAD34 million for exploration and development in eastern Alberta the rest of the year. That should be more than enough to hold current production levels. Meanwhile, it continues to meet its projections for debt and distribution coverage, which it refreshes with every quarterly release. The payout ratio for 2010 will fall between 49 and 64 percent, no matter what gas prices do, while net debt-to-funds flow will range from 2.4 to 2.8-to-1.

Both are reasonable levels for maintaining Perpetual’s yield of nearly 12 percent, though energy price swings are always a threat. Perpetual Energy, the former Paramount Energy Trust, is a buy for aggressive investors who don’t already own it up to USD6.

Peyto Energy Trust (TSX: PEY-U, OTC: PEYUF) boosted its second-quarter output by 23 percent over last year’s levels, for a 29 percent increase in debt-adjusted production per unit. Coupled with a 12 percent reduction in operating costs per barrel of oil equivalent (boe) to just CAD2.28 and a 51 percent jump in realized selling prices for oil and natural gas liquids, FFO was lifted by 15 percent, despite a 21.5 percent drop in realized natural gas prices.

Peyto also set the stage for higher production in coming months, as it increased capital spending more than sevenfold from last year’s tally to CAD37.4 million. The company continued development of its Cardium, Notikewin and Wilrich Deep Basin tight gas plays, drilling seven new horizontal wells during the quarter. The average rate of output has been five times greater than equivalent vertical wells, with average capital required only 2.5 times that of vertical wells.

Looking ahead, Peyto anticipates this quarter exceeding its previous output high of 24,000 boe per day. Management also forecasts further cost efficiencies, holding down debt and keeping reserve life and value among the highest in the industry.

The second-quarter payout ratio was roughly flat with last year at 83 percent, while the first half payout was also the same at 77 percent. Management has stated it will maintain that rate until the end of 2010, when it intends to convert to a corporation. It has declined to set a post-conversion payout level to date, stating only that details “will be communicated in the coming months and a unitholder meeting is planned for December 8,” presumably to vote on its plans.

Given that natural gas is scraping along near multi-year lows and the company’s relatively high payout ratio, at least some distribution cut looks likely at that time. On the other hand, management has affirmed in the past that it wants to remain a dividend paying company and insiders own a large chunk of the common units, as Peyto’s website proudly displays. Moreover, operations remain solid and, despite a strong rally since March 2009, the units still sell at a discount to reserve value.

My buy target remains US15 for those yet to get in on Peyto Energy Trust, at least until 2011 dividend questions are resolved. At that price or lower, however, Peyto is a strong value and a great way for risk-averse investors to play an eventual comeback for natural gas.

Provident Energy Trust (TSX: PVE-U, NYSE: PVX) issued its first earnings report reflecting the spin off its oil and gas production operations as Pace Oil & Gas (TSX: PCE, OTC: MDOEF). As expected, headline earnings were hit by the cost of the spinoff, as well as a loss on closing out hedge positions for oil and gas prices. But the most important result was that the “core midstream business” operations were “in-line with expectations” with first half gross operating margins up 9 percent from year-earlier levels.

Keeping that going is the key to how much Provident will pay in distributions when it converts to a corporation later this year. Midstream margins were up 9 percent for the first half of 2010 but slipped 12 percent in the second quarter versus year-earlier tallies. A weak Michigan economy hit sales volumes for natural gas liquids and the company saw lower demand for propane in the US Midwest, butane and western Canada and lower condensate margins as well. That was partly offset by better profits at the commercial services division.

Using adjusted funds flow from continuing operations as a profit benchmark, Provident’s payout ratio was 120 percent in the second quarter. First half 2010 came in at 110 percent, including the one-time impact of shutting down the hedge positions. Those figures obviously have to come down for the distribution to be sustainable, particularly once the trust converts to a corporation.

Tax pools that will shelter income from taxes until 2013, and robust capital spending on asset expansion are two factors that will push things in that direction. But management is still not saying what it plans to do on the payout.

As for Pace Oil & Gas, management apparently has no plans to pay a dividend. Rather, upside will come over time from higher energy prices and a possible takeover and in the near term as selling by dividend-seekers winds down and growth seekers replace them. Pace’s 55 percent oil and liquids focus is a plus, as are its numerous undeveloped lands, low costs (CAD8.69 per boe operating costs) and solid financial position.

My advice remains to plan on holding both Pace and Provident at least to the end of the year. I expect at least some distribution cut at Provident, with an announcement in the fourth quarter, but for the company to continue paying out at a healthy rate. And at a yield of nearly 11 percent, a reduction of some sort is certainly priced in. My expectation for Pace is that the stock will bounce back to double-digits.

Provident Energy Trust is a buy up to USD8 for those who don’t already own it. Hold Pace Oil & Gas.

Trinidad Drilling (TSX: TDG, OTC: TDGCF) has been on Portfolio probation the past several months, as the company has struggled to maintain profitability in a tough environment. The good news is second quarter earnings were a definite improvement over what we’ve seen lately. The bad news is there’s still a long way to go to bring this company back to its former strength.

Revenue ticked up 2.6 percent from last year’s level, largely thanks to increased utilization of the company’s North American rig fleet. But the salutary impact was muted by lower returns elsewhere, notably Mexico. Canadian utilization was up 142.9 percent from last year in Canada and at the top of the industry, though at 50 percent for the year-to-date is still well below levels of a couple years ago.

Cash flow was CAD0.33 per share, up 38.1 percent for the quarter. It was still off 14.8 percent for the six months, however, on lower gross margins. This last was the most worrisome news, as it signals that even with rising activity profits may lag for some time.

Trinidad’s focus on deep drilling, long-term contracts and conservative finances have kept it in good shape throughout some very difficult industry conditions. And it continues to expand its offerings in shale-rich areas, where energy patch activity never really slowed. The rig mix represented by the upsurge in drilling activity, however, is more weighted toward conventional-style equipment, which produces lower day-rates, margins and, by extension, profits.

The company continues to make progress cutting debt, trimming leverage 21 percent since the end of 2007. There are no significant maturities until July 31, 2012. The payout ratio based on second-quarter cash flow is just 15 percent. And management is optimistic, stating in the second-quarter conference call that market conditions are steadily improving and will continue to strengthen into 2011.

Those are all good reasons to continue holding onto Trinidad Drilling for now. But I’m keeping it a hold.