In the May issue of Canadian Edge I analyzed results for the roughly half of the Portfolio companies that had reported earnings. We’ve now reviewed the remaining half in a series of Flash Alerts and the weekly Maple Leaf Memo this month, and it’s time to reflect on the season’s key takeaways.

First and most important, the core businesses of all of our Aggressive and Conservative holdings continue to strengthen. That includes holdings such as IBI Income Fund (TSX: IBG-UY, OTC: IBIBF), where the headline distributable cash flow number fell short of coverage. Part of the reason is the recovering Canadian economy but most of the good news is due to management continuing to execute. And all signs point to more good numbers for the rest of the year and beyond.

Second, our holdings continued to put the pieces in place for higher cash flows going forward, by expanding their bases of assets and/or order backlog. More than a few announced substantial increases to capital spending for the rest of 2010 and into 2011.

Third, our recommendations’ strategic moves remain very shareholder friendly, a consequence of running consistently solid operations.

Daylight Energy (TSX: DAY, OTC: DAYYF) completed its conversion to a corporation and immediately announced a reduction in its distribution to a monthly rate of CAD0.05 per share from the current rate of CAD0.08. That was well within market expectations and reflected management’s desire to shepherd more cash for development opportunities at a time when natural gas prices remain stuck at multi-year lows.

The new dividend yield is roughly 6 percent and should be covered by post-tax cash flow by nearly a 3-to-1 ratio. Continuing the monthly rate is a clear sign the dividend will remain a big part of Daylight’s strategy, and increases are likely once gas prices get some upward momentum. Daylight Energy remains a buy up to USD11.

Daylight’s move leaves just five Portfolio holdings yet to declare post-conversion dividend policies. ARC Energy Trust (TSX: AET-U, OTC: AETUF) has come closest, stating it will pay at a “similar” rate as a corporation to what it does now as a trust. The company may not make a full reckoning until it converts, which now looks like the end of 2010. But ARC Energy Trust is a value and a buy up to USSD22.

CML Healthcare Income Fund (TSX: CLC-U, OTC: CMHIF), IBI Income Fund, Penn West Energy Trust (TSX: PWT-U, NYSE: PWE) and Provident Energy Trust (TSX: PVE-U, NYSE: PVX) also may not fully declare their intentions until the end of 2010.

Penn West has the added concern about where energy prices will be then. But the company did have one major bullish announcement this month: the signing of a strategic partnership with sovereign wealth fund China Investment Corp (CIC) to develop its Peace River oil sands properties. That means additional cash flow management hadn’t built into projections. And it’s another good reason to buy Penn West Energy Trust–trading at just 80 percent of the value of its assets in the ground–up to USD22.

As for Provident, I continue to view its strategic spinoff as bullish for investors. To review, the company will spin off and combine its remaining oil and gas production operations with those of Midnight Oil (TSX: MOX, OTC: MDOEF). Provident unitholders will receive 0.12225 shares of the new company for every one of Provident they now hold.

The new production company will be focused on developing its resources and no one should count on a dividend. However, post-spinoff Provident, dubbed Provident Midstream, will continue to pay distributions at the current 6 cents Canadian per share monthly rate, at least through the end of 2010. At that point, it will likely convert to a corporation and a new dividend policy will be reset.

As a major owner and operator of natural gas liquids (NGL) midstream assets, the new Provident will be able to support a high level of dividend after conversion. It will also be a potential takeover target, as NGL production increases continent-wide. The new oil and gas production company could also be a target, though its most likely appeal will be appreciation as the value of its oil and gas rises.

I continue to recommend holding onto Provident Energy Trust through the spinoff and after that to hold both portions. Provident is a buy up to USD9 for those who don’t already own it.

The fourth takeaway is the selloff in our picks over the past few weeks has nothing to do with the solid health of their operations, and potential exposure to a second credit crisis is virtually nil. It’s worth noting that no CE Portfolio recommendations–with the exception of now-sold Consumers’ Waterheater Income Fund (TSX: CWI-U, OTC: CSUWF)–had credit concerns during the 2008 meltdown. In the year and half since, they’ve further limited their exposure by using low interest rates to pay off what needed to be refinanced.

The Canadian dollar remains in many investors’ minds a resource currency, to be sold whenever there are worries about the global economy. That perception remains despite the fact that Canada’s federal budget, trade balance and overall economy are on far stronger ground than their US counterparts.

As a result, economic worries have sent some running for the exits, selling Canadian stocks to buy US bonds. And the result as has been that Canadian investments’ US dollar value has taken a knock, as the Loony has dropped from near parity to the USD0.94 to USD0.95 range.

The rebound in both Canadian equities and the currency this week from recent lows is encouraging indeed. And it’s a clear indication of what to expect when the economic news turns positive.

I can’t promise we won’t see more fear-induced selling in the days ahead, as rumors continue to fly about the solvency of European governments. But with the Canadian economy clearly showing strength and our picks demonstrating that through solid earnings, I’m confident whatever losses we see in the near term will be more than made up for as the bull market that began in March 2009 resumes.

Remember, our goal is to buy good businesses that will build our wealth while paying big distributions. Prices may have gotten a little cheaper in recent weeks. But first quarter earnings show plainly that the fundamentals of our holdings are sound as ever. And as long as that’s the case, we’ll be hanging in there.

We’ll be sending the June issue on Friday, June 4.