The silver lining for continuing to hold trusts during the Great Panic of 2008 is twofold: value and dividends. Trusts backed by strong businesses are now selling at levels not seen since very early in the decade. As I pointed out in a recent Flash Alert, several oil and gas producers actually trade below where they did in late 2001, when oil was under $20 a barrel and natural gas last sold for $2 per million British thermal units. Owning them now is literally like owning oil at $20 again.

At the same time, dividends have also by and large held up. Despite the drop in share prices, worries about Canada’s growth and global credit market concerns, trust after trust has confirmed they’ll keep paying their current dividend at least for the foreseeable future.

EnerVest Diversified Income Fund (TSX: EIT-U, OTC: EVDVF) recently announced it will maintain its 7 cents Canadian monthly disbursement for at least the next 12 months. Management also announced a warrant offering, allowing existing shareholders to purchase additional shares at a discount.

I recommend anyone able to execute these warrants to do so. Unfortunately, that may exclude many US investors. But management has stated it will provide an equivalent cash value to its owners south of the border. It’s also affirmed it will remain a big dividend payer well after 2011 and is continuing with share repurchases to close the yawning gap with net asset value. All in all, this is very bullish for EnerVest, and it’s another reason why it remains my top fund recommendation for trusts.

Third quarter earnings results are still to come for our recommended individual trusts, and we’ll be reviewing them as they appear. But if the ability to access cash for acquisitions is any indication of good health, we should see some solid numbers for the third and fourth quarters. And that should keep our now deeply undervalued CE recommendations on the recovery path, particularly as the overall level of fear drops in global markets. (See this week’s Maple Leaf Memo for our current take on the crisis).

Unfortunately, the nature of stress tested markets is that some of the players fail to deliver. That’s now the case with Algonquin Power Income Fund (TSX: APF.UN, OTC: AGQNF), which announced a reduction in its distribution from an annual rate of 92 cents Canadian to just 24 cents.

As is usually the case with such actions, management is attempting the cast its move as bullish for growth, as it will now be able to use the cash from the dividend for other purposes. That may prove to be the case, and growth may indeed accelerate as it’s able to pick up more assets in power and waste water. And certainly, Algonquin already has very solid assets, cash flows from which are highly insulated against recession.

Unfortunately, we can’t be certain there aren’t deeper problems here, particularly in an environment where business after business is being severely stress tested. With its far-flung assets, it’s quite possible parts of Algonquin are being severely stress tested, possibly by the credit market. That’s been the case with other dividend cutters, and those who stuck around suffered even bigger losses.

Most likely, the reason for the dividend cut is to effectively convert the trust into a corporation early, without changing the tax status ahead of 2011. An outright conversion would have required shareholder approval. This way, management can make its move without consulting anyone.

Thus far, investors haven’t thought a lot of Algonquin’s move. Already trading well below book value, shares have further cratered today.

If all is truly well here, a good chunk of those losses will reverse in the coming weeks. On the other hand, however, we’re still in a very difficult environment, and we’ve seen time and again why it pays to unload dividend cutters, no matter how positive their explanations are.

The good news is there are plenty of other options here in the power sector that don’t carry Algonquin’s baggage. One I’ve recommended as a buy since the launch of Canadian Edge is Great Lakes Hydro (TSX: GLH-U, OTC: GLHIF).

Majority owned by conglomerate Brookfield, Great Lakes is the largest power trust in North America with 1,021 megawatts of entirely hydroelectric power. High quality has meant that Great Lakes’ shares have traditionally traded at a steep premium to other Canadian power trusts, as well as the broad market. After the past month’s selloff, however, it’s back to sporting a yield of well over 8 percent.

Unlike any other power trust, Great Lakes has already quantified the impact of the trust tax on its cash flows. In fact, it did so almost immediately after the Halloween announcement, stating it would see a roughly 14.5 percent hit to cash flow. With prospective 2011 corporate tax rates and trust tax rates reduced by the government since then—and likely to be cut even more in the next couple years—the hit will wind up being less still.

That leaves a lot of room for this high quality power trust to keep paying high dividends for years to come. Buy Great Lakes Hydro all the way up to USD18. I’ll be focusing on it more intently in the November issue, at which time we’ll have third quarter earnings to report. Sell Algonquin Power Income Fund.