In the May issue of Canadian Edge I highlighted first-quarter earnings results from five Portfolio members, the only companies reporting up to then.

There were four very strong outcomes and one disappointment. That, of course, was Colabor Group Inc (TSX: GCL, OTC: COLFF), which suffered a first-quarter profit shortfall due to costs it was unable to pass to customers in a constrained, competitive market.

After an initial decline following the announcement Colabor shares have stabilized, and my expectation is we’ll see a sharp operational improvement in subsequent quarters. The company continues to execute its strategy of buying smaller rivals, cutting costs and improving margins through scale. Management has affirmed, repeatedly, that the distribution isn’t at risk, despite a spike in the first-quarter payout ratio to more than 200 percent.

I continue to hold Colabor in the Portfolio, with the caveat that I want to see improvement in the numbers going forward.

I also made Yellow Media Inc (TSX: YLO, OTC: YLWPF) a hold in the May CE, after the company reported strong first-quarter earnings.

The other three companies reporting early enough to be featured in the May Portfolio Update also generally shined brightly: Acadian Timber Corp (TSX: ADN, OTC: ACAZF), AltaGas Ltd (TSX: ALA, OTC: ATGFF) and Penn West Petroleum Ltd (TSX: PWT, NYSE: PWE).

Acadian Timber is now a buy up to my raised target of USD13. AltaGas is a buy on dips to USD24, with the potential for a higher buy target pending a dividend increase. Penn West is a buy up to USD30, and continues to sell for less than conservative valuations of its oil and gas reserves.

This week 10 more Portfolio Holdings turned in their numbers. Happily, all of them followed the example of the four early reporters with favorable results.

Atlantic Power Corp (TSX: ATP, NYSE: AT) is still looking to replace its chief financial officer, who plans to leave after closing the books on the second quarter of 2011. Despite a boost in the payout ratio to 114 percent from 89 percent last year–largely due to an equity offering to finance acquisitions and development–management maintained its 2011 guidance. It also affirmed its long-term forecast that the current dividend is sustainable at least to 2016, even in a worst-case for new development and existing projects.

Construction at Piedmont Green Power is on schedule and on budget, and the company closed the sale of the Topsham project, providing cash proceeds of USD8.5 million to plough back into the operation. President and CEO Barry Welch, speaking during management’s first-quarter conference call, said, “We continue to focus on accretive development and acquisition opportunities to enhance our long-term cash flows and are confident that we can continue to execute on our growth strategy.” Financing needs have been met for the Piedmont plant, the company’s primary ongoing new plant development.

Going deeper into the first-quarter results, management confirmed previous guidance for distributions from projects of USD80 million to USD90 million for the full year 2011 compared to USD83 million in 2010.

The company has now received initial distributions from recent investments in Idaho Wind and Cadillac, which will offset the dilution from the equity issue going forward. The full-year payout ratio is expected to be 100 to 105 percent of distributable cash flow, with higher distributions from projects driving it down sharply in 2012 and beyond. Atlantic Power Corp remains a buy on dips to USD15.

Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF) pushed up first-quarter revenue by 3.4 percent, thanks to a 3.7 percent boost in rents and an increase in occupancy to 98.3 percent from 97.8 percent. Perhaps more important, profit margin based on net operating income rose to 53.9 percent from 52.3 percent the year before, as the owner of apartment buildings in Canada continued its masterful control of costs.

The first-quarter payout ratio based on normalized funds from operations came in at 92.6 percent, down from 93.1 percent a year ago. The first quarter is seasonally weak, as apartment owners incur greater heating expenses. Net funds from operations were up 12.4 percent in the quarter. Meanwhile, the effective payout ratio–which includes the dividend reinvestment plan–was only 72.5 percent, down from 80.1 a year ago. The company was able to refinance CAD111 million in mortgages, extending maturities and cutting interest costs.

It also announced the purchase of an 83-suite town home in Hamilton, Ontario, and 495 suites in the Greater Vancouver region. It all paints the picture of a solid enterprise with few risks, even if Canada’s property market does cool off meaningfully. Buy Canadian Apartment Properties REIT up to USD20.

Cineplex Inc (TSX: CGX, OTC: CPXGF) became the latest income trust-turned-corporation to boost its monthly dividend, taking it to CAD0.1075 per share (CAD1.29 on an annualized basis) effective with the Jun. 30 payment.

The company’s headline earnings number was a negative CAD800,000, as revenue dropped 13.3 percent on 14.6 percent lower theater attendance. That was largely the result of what CEO Ellis Jacob calls “the Avatar factor,” and studios’ inability to duplicate its blockbuster impact. The impact on profitability, however, was well offset by the company’s diversified business model and related revenue streams, such as the media business that grew sales 26.6 percent.

In April Cineplex announced it was paying CAD3.3 million to acquire New Way Sales Games Ltd, a move that will further diversify revenue and improve revenue-per-customer as well. Buy Cineplex Inc on dips below USD24.

Davis + Henderson Income Corp (TSX: DH, OTC: DHIFF) posted first-quarter 2011 results right in line with management’s projections. That’s in large part thanks to continued successful acquisitions of businesses that complement its revenue mix, such as the January purchase of ASSET Inc. Revenue rose 8.8 percent, while cash flow was basically flat. Adjusted net income came in at CAD0.5346 per share, providing solid dividend coverage of roughly 1.6-to-1.

My view in early 2010 when D + H announced a conversion-driven dividend cut was that it could have continued to pay a lot more but was being very conservative about its potential growth. These results confirm that. The good news is they also make it likely dividends will return to growth in coming quarters. Note the dividend is now quarterly, with the next scheduled payment due in June. ASSET, the leading provider in the Canadian market of asset recovery solutions, should boost 2011 earnings. The company has also completed the purchase of Mortgagebot LLC, a leader in web-based mortgage point-of-sale solutions in the US, serving nearly 1,000 financial institutions. Davis + Henderson Income Corp is a buy up to USD20.

EnerCare Inc (TSX: ECI, OTC: CSUWF) scored overall revenue growth of  25 percent in the first quarter. According to CEO John Macdonald, that was in large part due to “customer retention in our (waterheater) Rentals business (which) improved by 10 percent compared to the same period last year.” But it was also due to a 442 percent jump in submetering revenue, reflecting a big jump in sales since Ontario regulators at last clarified marketing rules for the industry.

Revenue in the rentals business increased 1 percent overall, as rate increases offset what attrition there was. Cash flow rose 4 percent, 2 percent excluding one-time items. Pluses included higher revenue, lower interest expense and reduced loss on disposal of equipment. The headline earnings number was a loss. But like other former trusts, EnerCare pays its dividends from distributable cash flow, which improved and pushed the quarterly payout ratio down to 57 percent, from 59 percent last year.

That’s a strong vote of confidence in the safety of the dividend going forward, and a good reason to buy EnerCare (formerly Consumers’ Waterheater), which yields nearly 9 percent, up to USD8.

Keyera Corp (TSX: KEY, OTC: KEYUF) increased its dividend last month. But with CAD0.93 per share in free cash flow per share pushing the payout ratio to 49 percent in the first quarter, there’s surely more to come.

The business model is adding fee-generating assets, which then boost cash flow and dividends. The first quarter saw all operations of the company prosper, even as it made CAD28.2 million in new capital expenditures. Plans are for CAD100 million to CAD120 million for the full year, excluding acquisitions. That includes construction of the Carlos pipeline, a 45-kilometer, 12-inch gathering pipeline delivering liquids-rich gas to the company’s Rimbey gas processing plant. The project was completed in mid-April and will add to second-quarter earnings. Keyera also opened a new pipeline connection between the Enbridge Southern Lights diluent pipeline and its Edmonton terminal, further spurring natural gas liquids traffic on its system. Keyera continues to benefit from rising gas producer activity around its plants and the ramping up of oil sands developments in Alberta.

Turning to individual divisions, Gathering and Processing operating margin rose 14 percent in the first quarter. Operating margin from our NGL Infrastructure segment was up 4 percent. And the Marketing group turned in operating margin of $39.4 million, as it took advantage of margin differentials in NGLs.

Keyera Corp is still trading substantially above my buy target of USD38 but always rates a buy below that price.

Newalta Corp (TSX: NAL, OTC: NWLTF) continues to execute its strategy of consolidating the waste cleanup and recycling business that’s a natural outgrowth of Canada’s resource production. CEO Al Cadotte noted a “28 percent contribution to adjusted cash flow (the primary measure for company profits) from incremental revenue” and he expects “the positive market trends we’ve seen so far this year to continue in the quarters ahead.”

Newalta’s solid results led management to again ratchet up the dividend, this time by 23 percent to a new quarterly rate of CAD0.08 per share. The Facilities Division, which focuses on activity at owned assets, saw revenue rise 17 percent and cash flow 10 percent during the quarter. That was in large part due to strength at facilities in western Canada, where increased drilling activity offset industrial weakness in eastern Canada.

Commodity prices of recycled products were slightly higher. The Onsite Division–which operates at customers’ facilities–enjoyed a 14 percent revenue burst and a 54 percent jump in operating margins. Incremental revenue from expansion opportunities generated a 71 percent flow through to gross profit, primarily due to higher demand for drill site services. And management expects activity to get even stronger in the second quarter, as waste volumes in the energy patch in particular continue to grow.

Overall cash flow margins improved to 23 percent, up from 22 percent last year. Expenses were broadly in line with management targets. And the company continued to advance its technical capabilities, with several promising technologies moving to the “pilot phase.” The company also expects CAD73 million in expenditures on new business activity to fuel further profit gains.

Newalta has had more ups and downs since my initial April 2005 recommendation than any other CE Portfolio Holding. We held through the pain, and these results clearly point the way to much more gain. Buy Newalta up to my target of USD13.

Parkland Fuel Corp (TSX: PKI, OTC: PKIUF) saw its first-quarter cash flow surge 238 percent on a 25 percent jump in fuel sales volumes, which exceeded 1 billion liters for first time ever.

The company also announced its will buy Cango Inc, a major independent retail fuel marketer in Ontario that operates under the Cango, Sunys, Gas Rite and Esso brands. Cango controls 29 retailers and 126 dealers, 80 of which are Esso branded under a deal with Exxon Mobil’s (NYSE: XOM) Canadian unit Imperial Oil (TSX: IMO, NYSE: IMO). The deal will need the approval of the Canada Competition Bureau and a price has yet to be announced.

Even without it, however, Parkland has plenty of room to grow, including with the recent purchase of seven retail fuel outlets in British Columbia and Alberta,  representing 25 million liters sold in Save on Foods Gas Bars. These will be in operation in time for summer driving season, providing a further lift to sales. As Bob Esprey modestly explained, “The combination of normal winter weather across Canada, strong refiners’ margins, and the inclusion of winter operations from Bluewave Energy and Island Petroleum led to strong results for the first quarter of 2011.”

My view is these results are at last the vindication that Parkland’s strategy has paid off. And with cash flow coverage of the distribution now up to 3.33-to-1, there’s a lot more room to grow profits and dividends going forward. That’s a powerful potential upward catalyst for Parkland Fuel and a good reason to buy the stock up to USD13.

Peyto Exploration & Development Corp’s (TSX: PEY, OTC: PEYUF) 50 percent dividend cut at conversion and steep run-up in share price has raised some questions from readers about just why I continue to recommend it. The yield, after all, is now under 4 percent, and the company relies on natural gas for 88 percent of production at a time when abundant supplies of the clean fuel appear set to be with us for years.

Those who want a high yield may indeed find other fare more tempting. For my money, however, I have two reasons to stick with Peyto. First, a conservative valuation of its proven plus probable reserves in the ground–even using very conservative targets for natural gas prices–is USD33 percent share. That’s some 60 percent above Peyto’s current share price. My buy target remains USD22, largely because of how weak the gas market is and how low the dividend yield is at the current price. But the reserve valuation is a clear sign of the company’s considerable long-term value; sooner or later it will pay off as capital gains for US investors.

Second, Peyto is by far the most efficient producer of natural gas in Canada and has proven it can grow profits at a rapid clip, even when the price of the energy it sells weakens. First-quarter 2011 funds from operations per share surged 10 percent, as the company reported a 32 percent boost in production to an average of 31,531 barrels of oil equivalent per day. Operating costs were cut again to just CAD2.32 per barrel of oil equivalent. And debt adjusted production per share soared 48 percent, as the balance sheet improved as well. That was all despite a whopping 19 percent drop in realized selling prices of the company’s oil and gas.

If Peyto can do this well in a dismal pricing environment for gas, think what it will do when prices ultimately bounce back. The company’s executives and directors are certainly believers, which they periodically demonstrate by purchasing the stock on the open market. Peyto Exploration & Development is a buy up to USD22 for those who don’t already own it.

Provident Energy Ltd (TSX: PVE, NYSE: PVX) reports it’s right on track to meet management projections for adjusted cash flow, i.e. excluding one-time items. Adjusted cash flow is the company’s own primary internal measure of profitability, and what it sets dividend policy on. Management is still expecting between CAD200 million and CAD250 million for full-year 2011. That’s more than enough to ensure the safety of the monthly dividend as well as provide funds for additions of fee-based assets that will ensure future growth.

In another sign of strength, the company expanded its 2011 capital budget by 21 percent to CAD130 million. That follows the avowed strategy of CEO Doug Haughey, who stated, “Provident is well positioned to drive future growth from the Montney and Marcellus natural gas plays, as well as from opportunities surrounding the Alberta oil sands.”

As for first-quarter numbers, gross operating margin rose 13 percent, reflecting stronger sales volumes and product margins particularly in the company’s signature natural gas liquids business. The Redwater West and Empress East facilities increased contributions by 19 percent and 16 percent, respectively.

Meanwhile, adjusted funds flow from continuing operations increased 13 percent to CAD0.20 per share. And the payout ratio of 75 percent of distributable cash flow from continuing operations is the strongest in a while. Total debt decreased by 5 percent and total debt to cash flow fell to 1.9-to-1 versus 2.1-to-1 a year ago. A deal with AltaGas Ltd (TSX: ALA, OTC: ATGFF) promises to provide many more opportunities for rapid growth in fee-based assets under management, while cutting financial risk of expansion.

I’m more convinced than ever that Provident has turned the corner. Buy Provident Energy up to USD9.

Vermilion Energy Inc (TSX: VET, OTC: VEMTF) has slipped a bit below my buy target of USD50. Based on its robust first-quarter numbers, this is likely to prove a good entry time for anyone who doesn’t already own it.

First-quarter output rose 13.4 percent, remarkable as Australian production was lower due to weather factors. Those operations were back to normal in March, which will benefit output growth the rest of the year. Management is sticking to full-year 2011 production guidance, as well as the longer-term target of at least 10 percent a year. Funds from operations per share rose slightly to CAD1.14 per share, providing a roughly 2-to-1 coverage of the distribution.

Management, however, is unlikely to raise the payout until the Corrib project gets up and running, probably in 2013. Fortunately, that project remains on track, with regulatory approvals attained and construction proceeding. Meanwhile, the company’s main North American development–light oil output in the Cardium trend–is picking up steam, and Netherlands gains are expected to begin driving growth starting in the second quarter.

Overall, crude oil/liquids production was up 16.8 percent, as the company continues to trend toward an “oily” bias. Capital spending of CAD119 million in the first quarter should help that along, with much more to come.

Access to markets on three continents gives this company unique protection against falling energy prices in a single market, such as North American natural gas. This it proved during the 2008 crash and it makes the stock worthy of its current price premium to peers on either side of the border. Buy Vermilion Energy up to USD50 if you don’t own it.

Here are announced dates for the rest of the Portfolio for earnings releases. Note dates can change so stay tuned to Flash Alerts, when I’ll be updating numbers.

Aggressive Holdings

• Ag Growth International (TSX: AFN, OTC: AGGZF)–Jun. 9 (confirmed)
• ARC Resources Ltd (TSX: ARX, OTC: AETUF)–May 19 (estimate)
• Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF)–May 30 (confirmed)
• Daylight Energy Ltd (TSX: DAY, OTC: DAYYF)–May 20 (estimate)
• Enerplus Corp (TSX: ERF, NYSE: ERF)–May 13 (confirmed)
• PHX Energy Services Corp (TSX: PHX, OTC: PHXHF)–May 20 (estimate)

Conservative Holdings

• Artis REIT (TSX: AX-U, OTC: ARESF)–May 18 (confirmed)
• Bird Construction Inc (TSX: BDT, OTC: BIRDF)–May 25 (estimate)
• Brookfield Renewable Power Fund (TSX: BRC-U, OTC: BRPFF)–May 12 (confirmed)
• Capstone Infrastructure Corp/Macquarie Infrastructure Corp (TSX: CSE, OTC: MCQPF)–Jun. 9 (confirmed)
• Extendicare REIT (TSX: EXE-U, OTC: EXETF)–Jun. 7 (confirmed)
• IBI Group Inc (TSX: IBG, OTC: IBIBF)–Jun. 1 (confirmed)
• Innergex Renewable Energy (TSX: INE, OTC: INGXF)– Jun. 7 (confirmed)
• Just Energy Group Inc (TSX: JE, OTC: JSTEF)–May 19 (confirmed)
• Northern Property REIT (TSX: NPR-U, OTC: NPRUF)–Jun. 14 (confirmed)
• Pembina Pipeline Corp (TSX: PPL, OTC: PBNPF)–May 20 (estimate)
• RioCan REIT (TSX: REI-U, OTC: RIOCF)–May 19 (confirmed)
• TransForce (TSX: TFI, OTC: TFIFF)–May 17 (confirmed)