Earlier this month Colabor Group (TSX: GCL, OTC: COLFF) got third-quarter earnings season off to a good start for Canadian Edge recommendations. As reported in an Oct.18 Flash Alert, the company set a favorable portent for the rest of the portfolio.

Specifically, management reported strong growth in revenue and cash flow, both from acquisitions and previously held assets. That demonstrated it’s dealing well with the tough operating environment and laid any questions to rest about dividend safety. The stock price has recovered somewhat but is still cheap up to USD10 and yields more than 10 percent.

Today AltaGas Ltd (TSX: ALA, OTC: ATGFF) kept things moving in a positive direction, announcing robust third-quarter numbers and raising its dividend for the first time since converting to a corporation in mid-2010. CEO David Cornhill had hinted at a return to dividend growth at a presentation this summer, which I reported in Canadian Edge. This 5 percent increase to a monthly rate of CAD0.115 per share signals we’ll see growth for years to come, as the company builds out its base of power and gas infrastructure.

Revenue surged 24.3 percent, while funds from operations–the account from which dividends are paid–rose 11 percent from last year’s level to CAD0.55 a share. That’s good enough to produce a payout ratio of just 62.7 percent, including the recent dividend increase. And it was achieved despite the negative impact of maintenance outages or “turnarounds” at several major facilities.

AltaGas currently has CAD1.6 billion in capital projects either under construction or construction-ready. Those are the foundations of its future growth and are mainly extensions of existing projects and properties, which further ensures their future returns. They include gas pipelines and processing facilities as well as gas-fired and hydroelectric power plants. Impressively, all major projects are both on time and on budget.

Like any company with a capital-intensive business, AltaGas carries a fair amount of debt financing for its various projects. Net debt as of the end of the third quarter 2011 was CAD1.049 billion, up from CAD981.2 million at the end of the second quarter. A CAD200 million issue of eight-year bonds at a rate of just 4.55 percent, however, clearly demonstrates the company is having no problem raising funds at low interest rates. And management was also successful extending a credit facility to four years.

The only debt maturity between now and 2015 is a CAD100 million bond with a coupon of 5.07 percent maturing Jan. 19, 2012. That’s more than half a point above what the company will pay on the newly minted eight-year debt, a refinancing opportunity that both cuts costs and erases risk. And it’s only 3.9 percent of current market capitalization to boot.

This is what I’ve come to expect from this exceptionally conservatively run company that misses just one of six Canadian Edge Safety Rating points solely because it cut its payout when converting to a corporation. The stock has now hit a new all-time high in US dollar terms–besting the previous high in early 2006, when natural gas prices were three times current levels and before Finance Minister Jim Flaherty announced the trust tax on Halloween night 2006. And with growth on track and extremely transparent going forward, I fully believe it will head a lot higher in coming years.

That’s an incredible testament to the value of buying good companies no matter how they’re taxed–and mainly former Canadian trusts’ ability to weather Flaherty’s folly and reward investors with outsized long-term returns. But given the speed and power of the stock’s recent move, I would urge a bit of caution for would-be buyers who didn’t take advantage when it traded at lower levels.

The stock currently yields just 4.65 percent. I would wait on a pullback to where the dividend increase will produce a yield of at least 5 percent, or somewhere in the 27-28 range before buying AltaGas.

The other CE Portfolio company to announce numbers this week is Acadian Timber Corp (TSX: ADN, OTC: ACAZF). Like many other Aggressive Holdings, the stock had a rough spring and summer, though October has seen a mild recovery. The reason is fear that a new global recession will crimp revenue and threaten the dividend, which management only just this spring restored to pre-corporate-conversion rates.

This week the company released numbers that reflected more difficult operating conditions but also that Acadian is weathering them. In the words of CEO Reid Carter, the company “performed well in the third quarter despite very wet weather conditions and challenges with the labour supply in Maine.”

Nine-month sales volume came in at 1,010 thousand cubic feet, virtually flat with 1,017 thousand cubic feet a year ago. Net sales were up slightly to CAD51 million from CAD50.4 million. Three-month net sales were CAD17.5 million, down slightly from CAD17.8 million a year earlier. Cash flow margin fell from 26 percent to 22 percent of sales, reflecting less income from land management operations and a higher percentage of lower-margin hardwood harvested versus higher-margin softwood.

On the plus side, Carter stated that “operating levels at Acadian’s primary sawmill and at pulp and paper customers are positive,” and that “demand and pricing will remain firm.” The company also continues to be able to move its wood waste for biomass fuel at good prices. All that points to steady operations and cash flow going forward.

As for distribution coverage, free cash flow came in at CAD0.19 per share, down slightly from CAD0.22 a year ago. That pushed the quarterly payout ratio up to 110.5 percent, though the nine-month payout ratio was somewhat lower at 101.6 percent of free cash flow.

The shortfall is roughly commensurate with the 1.5 percent drop in sales volumes in the third quarter of 2011 from year-earlier levels. Coupled with the solid operating conditions cited by management, this should be temporary and easily handled by the company’s reserves. Maintaining dividends in soft quarters is certainly a hallmark of Acadian’s parent Brookfield Asset Management (TSX: BAM/A, NYSE: BAM). And it’s what I expect to see for this company as well, as management has already affirmed the dividend payment for January 2012.

As for management’s stated outlook, the company remains quite conservative, mainly due to a prognosis for continued weakness in US housing. The current forecast is for 2012 to be much a repeat of 2011, with the market gradually recovering from 2013 to 2015. That’s hardly aggressive, and it provides another layer of protection for the dividend. So does the fact that the company has no maturing debt until Mar. 1, 2016, when a CAD82.5 million credit line (CAD72.5 million currently drawn) must be rolled over.

The stock is slightly off its recent lows but well down from the high set shortly after the company lifted its dividend. The current yield of over 8 percent is attractive, though the weakness in the housing market and high payout ratio means we may have to be patient for a share price recovery. My buy-under price remains USD13 for those who don’t already own Acadian Timber.

Third-Quarter Earnings Dates

Here’s when the rest of the Canadian Edge Portfolio will report third-quarter numbers. Some of the dates are confirmed, others are still in “estimated” category with a specific date to be announced later.

The November issue of Canadian Edge will be emailed to you and posted at www.CanadianEdge.com on Friday, Nov. 4. In that issue I’ll be highlighting numbers and provide analysis of any company that announces between now and then. Look for the rest in future Flash Alerts, with a full wrap-up of third-quarter earnings season and the impact on CE recommendations in the December issue.

Conservative Holdings

• AltaGas Ltd (TSX: ALA, OTC: ATGFF)–Oct. 27 Flash Alert
• Artis REIT (TSX: AX-U, OTC: ARESF)–Nov. 8 (confirmed)
• Atlantic Power Corp (TSX: ATP, NYSE: AT)–Nov. 11 (confirmed)
• Bird Construction Inc (TSX: BDT, OTC: BIRDF)–Nov. 8 (estimate)
• Brookfield Renewable Power Fund (TSX: BRC-U, OTC: BRPUF)–Nov. 9 (confirmed)
• Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF)–Nov. 7 (confirmed)
• Capstone Infrastructure Corp (TSX: CSE, OTC: MCQPF)–Nov. 14 (confirmed)
• Cineplex Inc (TSX: CGX, OTC: CPXGF)–Nov. 10 (confirmed)
• Colabor Inc (TSX: GCL, OTC: COLFF)–Oct. 18 Flash Alert
• Davis + Henderson Income Corp (TSX: DH, OTC: DHIFF)–Nov. 8 (confirmed)
• Extendicare REIT (TSX: EXE-U, OTC: EXETF)–Nov. 8 (confirmed)
• IBI Group Inc (TSX: IBG, OTC: IBIBF)–Nov. 10 (confirmed)
• Innergex Renewable Energy Inc (TSX: INE, OTC: INGXF)–Nov. 8 (estimate)
• Just Energy Group Inc (TSX: JE, OTC: JUSTF)–Nov. 9 (estimate)
• Keyera Corp (TSX: KEY, OTC: KEYUF)–Nov. 1 (confirmed)
• Northern Property REIT (TSX: NPR-U, OTC: NPRUF)–Nov. 8 (confirmed)
• Pembina Pipeline Corp (TSX: PPL, OTC: PBNPF)–Nov. 9 (confirmed)
• Provident Energy Ltd (TSX: PVE, NYSE: PVX)–Nov. 9 (confirmed)
• RioCan REIT (TSX: REI-U, OTC: RIOCF)–Nov. 7 (confirmed)
• TransForce Inc (TSX: TFI, OTC: TFIFF)–Nov. 1 (confirmed)

Aggressive Holdings

• Acadian Timber Corp (TSX: ADN, OTC: ACAZF)–Oct. 27 Flash Alert
• Ag Growth International Inc (TSX: AFN, OTC: AGGZF)–Nov. 14 (confirmed)
• ARC Resources Ltd (TSX: ARX, OTC: AETUF)–Nov. 1 (estimate)
• Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF)– Nov. 10 (estimate)
• Crescent Point Energy Corp (TSX: CPG, OTC: CSCTF)–Nov. 4 (estimate)
• Daylight Energy Ltd (TSX: DAY, OTC: DAYYF)–Nov. 3 (estimate)
• EnerCare Inc (TSX: ECI, OTC: CSUWF)–Nov. 7 (confirmed)
• Enerplus Corp (TSX: ERF, NYSE: ERF)–Nov. 10 (confirmed)
• Newalta Corp (TSX: NAL, OTC: NWLTF)–Nov. 1 (confirmed)
• Parkland Fuel Corp (TSX: PKI, OTC: PKIUF)–Nov. 2 (confirmed)
• Penn West Petroleum Ltd (TSX: PWT, NYSE: PWE)–Nov. 3 (confirmed)
• Peyto Exploration & Development Corp (TSX: PEY, OTC: PEYUF)–Nov. 9 (estimate)
• PHX Energy Services Corp (TSX: PHX, OTC: PHXHF)–Nov. 3 (estimate)
• Student Transportation Inc (TSX: STB, OTC: STUXF)–Nov. 11 (estimate)
• Vermilion Energy Inc (TSX: VET, OTC: VEMTF)–Nov. 4 (estimate)