The second quarter wasn’t kind to commodity prices or to economic activity in North America, but there is good news. All six Canadian Edge Portfolio companies that have reported earnings since last week performed in accordance with management expectations.

That means cash flow adequately supported dividends, balance sheet strength and plans for future growth. As long as that remains the case, there will be no change in my advice.

Momentum is still the key for near-term stock performance. Stocks deemed “safe” are benefitting from buying momentum, which for 10 Conservative Holdings and three Aggressive Holdings has pushed prices temporarily above the fair value of their underlying businesses (i.e., my buy targets). Meanwhile, other stocks have been victims of selling momentum, as fearful investors flee equities perceived as relatively risky.

This sort of all-or-nothing approach is the total opposite of value investing. However, it’s perfectly understandable behavior, given a market fraught with so much uncertainty from events in Europe, and with the Great Recession so close in the rear-view mirror. But investors should avoid succumbing to the herd mentality, as it will likely lay waste to numerous portfolios in the coming months, just as it did in 2010 and 2011.

If you’re investing for dividends–and the capital growth that comes from a rising stream of them–make sure your trades are based on the actual health of the underlying businesses. Focus on real numbers, such as those I discuss below, not on the latest rumor or opinion du jour.

Acadian Timber’s (TSX: ADN, OTC: ACAZF) net sales rose 22 percent from a year ago on an improved harvest. Adjusted cash flow surged 267 percent, as cash flow margin rose to 15 percent of sales from 5 percent. Seasonally weak distribution coverage with free cash flow was also solid at 0.61-to-1.

CEO Reid Carter noted “reasonably strong” demand for spruce-fir sawlogs and hardwood pulpwood as a potential catalyst for improved second-half results. The company’s outlook is for a return to normal demand levels in North America in the 2014-15 time frame, with a gradual improvement until then, making efficiency measures critical.

Fortunately, Acadian and its principal owner Brookfield Asset Management (TSX: BAM/A, NYSE: BAM) appear to have both the financial resources and the commitment to continue paying the 20.625 cents Canadian per share quarterly dividend. My buy target remains USD13 for those who don’t already own the stock.

ARC Resources (TSX: ARX, OTC: AETUF) had another big quarter from a production standpoint. Crude oil output rose 18.4 percent from last year’s tally, while condensate production ticked up 13.1 percent, natural gas output surged 11.4 percent and natural gas liquids (NGL) were up 29.5 percent.

Offsetting the impact on funds from operations (FFO)–the account from which distributions are paid–were sharply lower selling prices across the board. Realized selling prices for gas were worst, falling nearly in half to just CAD2.03 per thousand cubic feet. But oil slid more than CAD20 a barrel to less than CAD79, while average NGL prices were off by more than 25 percent.

ARC’s FFO per share came in at 53 cents Canadian. That was still good enough to cover the dividend by a 1.9-to-1 margin, and produce a coverage ratio including capital spending of 0.9-to-1. But it also demonstrates no producer, not even a strong one like ARC, is wholly immune from volatile energy prices.

On the positive side, energy prices have since rebounded, which should improve FFO in the second half of the year. But no one should own ARC or any producer unless they’re bullish on energy prices for the long haul. My buy target remains up to USD26.

Newalta Corp (TSX: NAL, OTC: NWLTF) boosted revenue 4 percent and net earnings by 78 percent in the second quarter, though margins slipped slightly to 23 percent of revenue from 24 percent a year earlier. Adjusted cash flow per share also slipped 9 percent, while FFO fell 19 percent to 39 cents Canadian per share.

That was still good enough to cover the distribution by nearly a 4-to-1 margin. And the company was able to boost its “growth capital expenditures”–essentially investment in future growth–by 122 percent without offering new equity.

Growth at the company’s services business offset a 20 percent drop in pricing for the byproducts of its “cleanup” operations. Meanwhile, efficiency measures and well-placed expansion pushed return on capital to 14.4 percent from 14 percent a year ago. That’s a good sign for second-half 2012 growth, though a further slump in oil and lead prices would slow the rate. My buy target for Newalta remains USD15.

PHX Energy Services (TSX: PHX, OTC: PHXHF) grew its second-quarter revenue by 29 percent, thanks mainly to the rapid expansion of international operations to 17 percent of sales from 11 percent a year ago. Higher costs and an extended spring breakup season in Canada did, however, sink cash flow by 51 percent and FFO 40 by percent.

That pushed the company’s seasonally weak second-quarter payout ratio to 200 percent. First-half FFO coverage however, was still strong at 1.83-to-1 (payout ratio 54.6 percent). Meanwhile, capital expenditures were on target, up 68 percent from last year, as management stuck to its growth initiatives without issuing significant amounts of new equity.

The firm’s earnings are less sensitive to volatile energy prices than most energy services outfits, thanks to a global reach and exclusive focus on fast-growing horizontal and directional drilling activity. The company is still renting equipment at high rates in Russia and the US, and cost controls remain a challenge. And even directional drilling activity will slow if energy prices fall much further.

Both are major reasons why PHX shares have weakened since early spring. These results, however, confirm finances are still strong and the company is still growing in line with management’s plans. The stock is for aggressive investors only, but still ranks as a buy up to my longstanding target of USD14.

TransForce (TSX: TFI, OTC: TFIFF) boosted second-quarter revenue by 25 percent, earnings before interest and taxes by 39 percent, and net income excluding one-time items by 45 percent. That took profit per share up to 38 cents Canadian for the growing trucking and transportation company, covering the quarterly payout of 13 cents Canadian per share by nearly a 3-to-1 margin and setting the stage for another double-digit boost next year.

Looking ahead, the stock faces two headwinds. First, it’s come a very long way in a short time, generating a total return of over 40 percent year to date, while the typical Canadian stock remains underwater. It also once again trades a bit above my buy target following a post-earnings announcement surge. Second, management expects economic weakness, forcing it to rely on increased efficiencies and acquisitions for growth.

Fortunately, that’s business as usual for management, whose CEO Alain Bedard expects second-half operating earnings “in line with our guidance.” And with many opportunities to grow with acquisitions in the still-fragmented North American transport industry, the stock will eventually outgrow its current price range. Buy up to USD17.

Vermilion Energy’s (TSX: VET, OTC: VEMTF) second-quarter output was roughly flat with the first quarter, but up 11 percent from last year. The keys to the increase in production were the acquisition of additional producing areas in France and the company’s ongoing development of light oil reserves in the Cardium trend of Canada.

Like all producers, the company’s profit took a hit from lower energy prices. Cash flow from operations was flat with year-earlier levels at CAD1.30 per share, as selling prices fell an average of 12 percent. That was far less than most, however, as more than 80 percent of Vermilion’s production volumes are tied to “crude oil-based prices.”

Looking ahead, Vermilion’s lack of exposure to North American gas prices along with its cost-cutting efforts and the still on-schedule development of the Corrib field off the Irish coast should keep the company on track for dividend growth by 2015. The stock’s a buy up to USD50.

More Numbers

The following listing indicates when Canadian Edge Portfolio companies are slated to announce their calendar second-quarter 2012 results. For companies that have already reported, I’ve noted where to find my initial analysis. For a more comprehensive review–as well as results for non-Portfolio companies we track–see the regular August issue of CE, which will be published at our website on Friday, August 10.

All companies reporting August 9 or earlier will be highlighted in the August issue. Those reporting later will be featured in Flash Alerts, with a more comprehensive analysis offered in the September issue.

Conservative Holdings

• AltaGas Ltd (TSX: ALA, OTC: ATGFF)–Jul. 26 Flash Alert
• Artis REIT (TSX: AX-U, OTC: ARESF)–Aug. 8 (confirmed)
• Atlantic Power Corp (TSX: ATP, NYSE: AT)–Aug. 8 (confirmed)
• Bird Construction Inc (TSX: BDT, OTC: BIRDF)–Aug. 13 (estimate)
• Brookfield Renewable Energy Partners LP (TSX: BEP-U, OTC: BRPUF)–Aug. 7 (confirmed)
• Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF)–Aug. 9 (confirmed)
• Cineplex Inc (TSX: CGX, OTC: CPXGF)–Aug. 9 (confirmed)
• Davis + Henderson Income Corp (TSX: DH, OTC: DHIFF)–Aug. 8 (confirmed)
• Dundee REIT (TSX: D-U, OTC: DRETF)–Aug. 8 (confirmed)
• EnerCare Inc (TSX: ECI, OTC: CSUWF)–Aug. 13 (confirmed)
• IBI Group Inc (TSX: IBG, OTC: IBIBF)–Aug. 8 (confirmed)
• Innergex Renewable Energy Inc (TSX: INE, OTC: INGXF)–Aug. 7 (confirmed)
• Just Energy Group Inc (TSX: JE, OTC: JUSTF)–Aug. 9 (confirmed)
• Keyera Corp (TSX: KEY, OTC: KEYUF)–Aug. 8 (confirmed)
• Northern Property REIT (TSX: NPR-U, OTC: NPRUF)–Aug. 14 (confirmed)
• Pembina Pipeline Corp (TSX: PPL, NYSE: PBA)–Aug. 9 (confirmed)
• RioCan REIT (TSX: REI-U, OTC: RIOCF)–Aug. 10 (confirmed)
• Shaw Communications Inc (TSX: SJR/B, NYSE: SJR)–Jun. 28 (confirmed)
• Student Transportation Inc (TSX: STB, OTC: STUXF)–Sept. 21 (estimate)
• TransForce Inc (TSX: TFI, OTC: TFIFF)–Aug. 3 Flash Alert

Aggressive Holdings

• Acadian Timber Corp (TSX: ADN, OTC: ACAZF)–Aug. 3 Flash Alert
• Ag Growth International Inc (TSX: AFN, OTC: AGGZF)–Aug. 15 (confirmed)
• ARC Resources Ltd (TSX: ARX, OTC: AETUF)--Aug. 3 Flash Alert
• Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF)–Aug. 8 (confirmed)
• Colabor Group Inc (TSX: GCL, OTC: COLFF)–Jul. 20 Flash Alert
• Crescent Point Energy Corp (TSX: CPG, OTC: CSCTF)–Aug. 9 (confirmed)
• Extendicare REIT (TSX: EXE-U, OTC: EXETF)–Aug. 9 (confirmed)
• Newalta Corp (TSX: NAL, OTC: NWLTF)–Aug. 3 Flash Alert
• Noranda Income Fund (TSX: NIF-U, OTC: NNDIF)–Jul. 26 Flash Alert
• Parkland Fuel Corp (TSX: PKI, OTC: PKIUF)–Aug. 3 (estimate)
• Pengrowth Energy Corp (TSX: PGF, NYSE: PGH)–Aug. 10 (confirmed)
• PetroBakken Energy Ltd (TSX: PBN, OTC: PBKEF)–Aug. 9 (confirmed)
• Peyto Exploration & Development Corp (TSX: PEY, OTC: PEYUF)–Aug. 10 (estimate)
• PHX Energy Services Corp (TSX: PHX, OTC: PHXHF)–Aug. 3 Flash Alert
• Vermilion Energy Inc (TSX: VET, OTC: VEMTF)–Aug. 3 Flash Alert