Corporate bond yields are at 40-year lows. At the same time, dividend-paying equities have moved out to post-2008 crash highs, some to new all-time highs.

The upshot: The cost of capital has rarely been cheaper for many companies. That’s certainly the case for Atlantic Power Corp (TSX: ATP, NYSE: AT). And this month, the company took advantage by minting 6.03 million shares at USD13.35 each and simultaneously issuing CD80.5 million in 5.6 percent convertible securities maturing June 30, 2017. The notes are exchangeable for 55.2486 shares per CAD1,000 principal, meaning they’ll be worth exchanging for stock once Atlantic hits CAD18.10 per share.

Not surprisingly in this market Atlantic’s offer triggered selling, on some investors’ fear of potential dilution. That didn’t take the share price below my buy target of USD13. But it did prompt at least a few questions from readers about whether the stock was still safe and whether the potential dilution would put the dividend at risk.

Given the events of the past couple years and the fact that so much US productive capacity is idle, investors can be forgiven for having a “show me” attitude when it comes to companies raising capital. Over the past 10 days, however, Atlantic has announced actions that should put to rest even the deepest skeptic’s concerns.

On Oct. 21 Atlantic closed non-recourse, project-level bank financing for Piedmont Green Power, its first biomass power project. Terms include an $82 million construction and term loan, along with a $51 million bridge loan for approximately 95 percent of the federal stimulus grant due to the company within 60 days after startup.

The 53.5-megawatt (MW) plant is located approximately 70 miles southeast of Atlanta and will be run by Rollcast Energy, of which Atlantic now owns 60 percent. The plant will run on wood waste generated by the local forestry industry as well as the greater metro area. It’s expected to be up and running in the fourth quarter of 2012 and will generate $8 million to $10 million a year in distributions to Atlantic.

Output will be sold under a 20-year deal based mostly on capacity payments–meaning the company gets paid whether the plant runs or not. Biomass fuel costs are passed through in the contract. And Rollcast and Atlantic are also protected from unexpected construction costs by a “turnkey” contract that fixes them.

In short, this is another classic Atlantic Power deal–adding strong incremental cash flows to fund future dividends, while factoring out risk. So is the deal announced Oct. 25 to buy Cadillac Renewable Energy LLC, a 39.6 MW biomass power plant in Cadillac, Michigan, for $77 million. The seller is a unit of Atlantic’s former parent ArcLight Energy, and the deal is expected to close in the fourth quarter, generating annual distributions to the company of $3.5 million to $4.5 million a year starting in 2011.

The bottom line is Atlantic raised the lowest-cost capital in its history and has already put much of it to work with new cash-generating projects. That cash at a minimum means the current distribution is safer than ever, and the potential for future increases is greatly enhanced as well.

The stock is trading near an all-time high. My view has been not to raise the buy target again, at least until after management announces earnings on Nov. 10. And I’m also concerned about some investors’ tendencies to really overload their portfolios on one particular stock.

Based on these developments, however, for those without a position Atlantic Power Corp is now a buy up to USD13.50.

I’m also boosting my buy target for new Aggressive Holding Canfor Pulp Income Fund (TSX: CFX-U, OTC: CFPUF), after the operator of pulp mills and marketer of pulp products announced very strong third-quarter earnings. The operating partnership–of which the income fund owns 49.8 percent and from which comes all of its cash flow–posted CAD0.78 per unit of distributable cash flow. That covered the CAD0.69 per unit distribution by a comfortable 1.13-to-1 margin, and covers the current rate of CAD0.75 as well.

Third-quarter results were roughly as strong as those of the second quarter, as higher prices for pulp and paper products offset lower volumes and higher production costs. Both were affected by the scheduled maintenance outage at a major facility, which extended into the fourth quarter, but will have only about a third the impact on volume in the next batch of results.

Encouragingly, management reports global softwood pulp markets remain “balanced,” despite the impact of reduced Chinese demand and some additional supply in North American bleached softwood capacity. That augurs for solid results the rest of the year, which, in turn, means a robust level of distributions.

As I noted with the initial recommendation of Canfor Pulp, no one should expect the current distribution rate of CAD0.25 per quarter to hold up, particularly after the trust converts to a corporation on Jan. 1, 2011. Management has vowed to continue an aggressive payout rate, which is clearly in the interest of the operating partnership’s 50.2 percent owner Canfor Corp (TSX: CFP, OTC: CFPZF). But it’s also been clear that the distributions will closely track cash flow as they always have and that higher taxes will reduce cash flow.

In addition, profits depend on two factors affecting the business that have proven quite volatile over the years, mainly the cost of wood waste needed to process and the price of finished pulp products on global markets. Canfor Pulp has been in the sweet spot of both this year, particularly as higher cost competitors have had to shut in capacity. But as competitors come back up, there will be simultaneously more finished product on the market and less availability of wood waste. That, in turn, will crimp distributable cash flow as well.

The good news is even with slower business conditions and higher taxes Canfor Pulp is still capable of paying out a huge dividend. Debt isn’t a concern, and the company is also the sector’s lowest-cost producer, giving it flexibility not matched by rivals. So while we won’t know just what its post-conversion distribution will be until 2011, it’s certain to be substantial. And the current yield of over 18 percent prices in quite a cut in any case.

Consequently, I’m raising my buy target on Canfor Pulp Income Fund to USD16 for those who didn’t get in earlier this month on my initial recommendation.

Again, no one should ever overload on one particular company, no matter how attractive it looks. And no one should buy this one without a full acceptance of the fact that a dividend cut is almost surely coming.

Here’s when to expect earnings from the rest of the Canadian Edge Portfolio. I’ll be reviewing roughly half in the November issue, which will be e-mailed a week from Friday, and the rest in subsequent Flash Alerts as they come due.

Conservative Holdings

• AltaGas Income Trust (TSX: ALA-U, OTC: ATGFF)–Oct. 28 (confirmed)
• Artis REIT (TSX: AX-U, OTC: ARESF)–Nov. 9 (confirmed)
• Atlantic Power Corp (TSX: ATP, NYSE: AT)–Nov. 10 (confirmed)
• Bell Aliant Regional Communications Income Fund (TSX: BA-U, OTC: BLIAF)–Nov. 3 (confirmed)
• Bird Construction Income Fund (TSX: BDT-U, OTC: BIRDF)–Nov. 9
• Brookfield Renewable Power Fund (TSX: BRC-U, OTC: BRPFF)–Nov. 9 (confirmed)
• Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF)–Nov. 8 (confirmed)
• Cineplex Galaxy Income Fund (TSX: CGX-U, OTC: CPXGF)–Nov. 11 (confirmed)
• CML Healthcare Income Fund (TSX: CLC-U, OTC: CMHIF)–Nov. 11
• Davis + Henderson Income Fund (TSX: DHF-U, OTC: DHIFF)–Nov. 2 (confirmed)
• IBI Income Fund (TSX: IBG-U, OTC: IBIBF)–Nov. 10 (confirmed)
• Innergex Renewable Energy (TSX: INE, OTC: INGXF)–Nov. 12
• Just Energy Income Fund (TSX: JE-U, OTC: JUSTF)–Nov. 5
• Keyera Facilities Income Fund (TSX: KEY-U, OTC: KEYUF)–Nov. 2 (confirmed)
• Macquarie Power & Infrastructure Income Fund (TSX: MPT-U, OTC: MCQPF)–Nov. 3 (confirmed)
• Northern Property REIT (TSX: NPR-U, OTC: NPRUF)–Nov. 10 (confirmed)
• Pembina Pipeline Corp (TSX: PPL, OTC: PBNPF)–Nov. 3 (confirmed)
• RioCan REIT (TSX: REI-U, OTC: RIOCF)–Oct. 28 (confirmed)
• TransForce (TSX: TFI, OTC: TFIFF)–Oct. 29 (confirmed)

Aggressive Holdings

• Ag Growth International (TSX: AFN, OTC: AGGZF)–Nov. 10 (confirmed)
• ARC Energy Trust (TSX: AET-U, OTC: AETUF)–Nov. 1 (confirmed)
• Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF)–Nov. 10 (confirmed)
• Daylight Energy (TSX: DAY, OTC: DAYYF)–Nov. 4
• Enerplus Resources Fund (TSX: ERF-U, NYSE: ERF)–Nov. 12 (confirmed)
• Newalta Corp (TSX: NAL, OTC: NWLTF)–Nov. 5
• Parkland Income Fund (TSX: PKI-U, OTC: PKIUF)–Nov. 5
• Penn West Energy Trust (TSX: PWT-U, NYSE: PWE)–Nov. 5
• Perpetual Energy (TSX: PMT, OTC: PMGYF)–Nov. 9
• Peyto Energy Trust (TSX: PEY-U, OTC: PEYUF)–Nov. 11
• Provident Energy Trust (TSX: PVE-U, NYSE: PVX)–Nov. 10
• Trinidad Drilling (TSX: TDG, OTC: TDGCF)–Nov. 4
• Vermilion Energy (TSX: VET, OTC: VEMTF)–Nov. 5
• Yellow Pages Income Fund (TSX: YLO-U, OTC: YLWPF)–Nov. 3 (confirmed)