As soon as the situation in Greece turned violent European authorities’ participation in a full-blown US-style bailout was assured. Credit Suisse’s (NYSE: CS) reading that these are monumental decisions with transformative qualities akin to the circumstances that forged the United States in the late 19th century may be a bit dramatic. But there’s no doubt that Germany, for example, is tied a lot tighter to Greece than it was a week ago.

Of more immediate concern are the fates of Spain, Portugal, and even the UK, whose sovereign debt position didn’t improve simply by now former Prime Minister Gordon Brown’s resignation. Extraordinary efforts by the European Central Bank and the European Commission to assist faltering members of the EU come with austerity measures that will require tax increases. And many US investors live in perpetual fear that the Obama administration will tax them literally to death.

We’ve also word that BP’s (NYSE: BP) initial attempts to cap what could be the worst oil spill ever have failed. This mess won’t determine the long-term fate of offshore drilling; the world needs the oil too much. It is a graphic reminder of the ends to which we must go to satisfy global energy demand; the official response will likely lead to higher costs for offshore drilling and rising oil prices.

And despite a steady stream of data indicating the global economy has turned the corner–the US Dept of Labor reported last week that American employers added a net 290,000 new workers in April, the best jobs news in four years–worries of a double-dip recession persist. Small businesses, less likely to export to improving economies in Asia and Latin America and more dependent on bank lending than larger firms, are still hesitant to add to payrolls.

All this follows what’s been cheekily branded “The Crash of 2:45 p.m.” The immediate cause of last Thursday’s 1,000-point intraday freefall may live in some firm’s proprietary “black box” trading system, or it could be as simple as a particular broker’s too-fat finger. What’s inarguable is that before and after the “glitch” a lot of “sell” orders got executed. Though high-frequency or program trading accounted for most of the volume, a lot of those “sell” orders were entered by humans whose perception of the market had shifted on a dime.

In other words, they panicked. Though these “Four Horsemen”–sovereign debt risk, rising taxes, the future of global growth and environmental disaster–clearly make more difficult what was already a complicated environment for individual investors, it doesn’t pay let yourself be overwhelmed by them.

The Antidote

Canada’s fate is tied to the global recovery story because of the local economy’s reliance on resources and related industries. Even though it did things right heading into the Great Recession–stringing together a decade’s worth of balanced budgets, paying down public debt, reducing tax burdens, regulating its financial system–Canada suffered more than most during the recent volatility. It’s unfortunate, but it’s true.

The damage has been particularly acute for American investors in loonie-denominated assets, as the Canadian dollar pulled back from near parity to the mid-90s per US dollar.

We remain comfortable with the long-term fundamentals undergirding Canada’s economy. It remains the best place for US-based investors to find income in this uncertain environment.

Step back from the tumult for a moment and consider the following. One view of professional investing, articulated by John Maynard Keynes in his General Theory, is that it boils down to identifying stocks the investor believes will be appreciated most by other investors. In Keynes’ words, “We devote our intelligences to anticipating what average opinion expects the average opinion to be.”

Another way to look at it–particularly as an income investor–is to think about buying a stock with the intention of holding it forever. This way you’re not dependent on what someone else–some other, greater fool–thinks of the value of your investment.

What’s the benefit? You and your heirs can expect to receive regular monthly, quarterly or semi-annual dividend payments for as long as the company stays in business. You’re buying a cash stream that smoothes out volatility. If the value of a stock is based on its dividend stream, a selloff such as last week’s is nothing more than a buying opportunity.

The way to smooth out the volatility is to collect dividends. A great place to start building your portfolio of income-generating assets is with Canadian Edge Conservative Holding Innergex Renewable Energy (TSX: INE, OTC: INGXF).

Innergex did well during the first 12 weeks of the year securing its future as a provider of clean energy in Canada, opening one new hydroelectric facility ahead of schedule and on budget and executing long-term power purchase agreements (PPA) for three more that generate an aggregate 113 megawatts (MW).

The company also completed its metamorphosis from trust to corporation via a combination of Innergex Power Income Fund with former parent Innergex, which was completed March 29. The new company declared its first dividend along with its earnings report; an initial quarterly installment of CAD0.14818 per share (prorated to include an additional two days; the annualized rate is CAD0.58 per share) for July 15 to shareholders of record June 30.

Production for the quarter declined from 163,912 megawatt hours (MWhr) a year ago to 157,666 MWhr. Net unfavorable hydrologic and wind conditions across Innergex’ portfolio led to the production decline. Lower output combined with higher interest expenses on long-term debt to hold revenue roughly flat with year-ago totals. Adjusted cash flows from operating activities were CAD8.6 million, up from CAD8 million a year ago.

In addition to the three new plants in British Columbia, which will come on line in 2015 and 2016, Innergex anticipates closing the financing for two new wind farms before the close of the second quarter. Steady cash flow generated by 17 operating facilities–and long-term sustainability promised by a healthy pipeline of new projects–make Innergex Renewable Energy a great income stabilizer.

You Cruise, You Win

Roger Conrad and his KCI Investing colleagues have been combing the globe for their next luxury investment cruise: Any ports of call must be ripe with investment potential, of course, but they must provide a rich slice of the world’s treasures and unique insights into human luxury. And after the brutal year we just finished, who couldn’t use some luxuriant down time learning how to prepare their portfolios for what this next decade has in store.

Save the dates: Thursday, October 21, through Monday, November 1, 2010. Explore the wonders of Turkey and the Greek Isles while learning about the newest investment strategies from Roger, Elliott Gue, Yiannis Mostrous and GS Early.

While you enjoy unfettered access to the finest minds in investing today, Seabourn Cruises will upgrade the way you think about luxury cruising as you are feted aboard the brand new Seabourn Odyssey. From its all-included open bar of premium liquor, wine and beer to its almost better than 1-to1 staff-to-passenger ratio, to its maximum capacity of only 450 passengers, you will understand why it immediately jumped to the top of the luxury cruise line ratings charts when it hit the water in 2009.

For those of you lucky enough to have sailed with this keen crew in the past, you know you are in for a meticulously planned journey into the business, investment and cultural offerings of the region. KCI in partnership with Joseph H. Conlin Travel Management is offering this journey solely to KCI subscribers and their friends.

For more information and reservations, please click here.

The Roundup

We’re nearing the end of first-quarter earnings season, and the numbers so far bear out a reality that tempers what are clearly solid numbers: The year-over-year comparisons were generous this time around and will get tougher as we progress through 2010.

Aggressive Holdings ARC Energy Trust (TSX: AET-U, OTC: AETUF), Daylight Resources Trust (TSX: DAY-U, OTC: DAYYF), Enerplus Resources Fund (TSX: ERF-U, NYSE: ERF), Penn West Energy Trust (TSX: PWT-U, NYSE: PWE) and Vermilion Energy Trust (TSX: VET-U, OTC: VETMF) and Conservative Holdings Bell Aliant Regional Communications Income Fund (TSX: BA-U, OTC: BLIAF), CML Healthcare Income Fund (TSX: CLC-U, OTC: CMHIF), Davis + Henderson Income Fund (TSX: DHF-U, OTC: DHIFF), IBI Income Fund (TSX: IBG-U, OTC: IBIBF), Pembina Pipeline Income Fund (TSX: PIF-U, OTC: PMBIF), RioCan REIT (TSX: REI-U, OTC: RIOCF), TransForce (TSX: TFI, OTF: TFIFF) and Yellow Pages Income Fund (TSX: YLO-U, OTC: YLWPF) are reviewed in Portfolio Update in the May Canadian Edge.

By this time next week all but one of the Aggressive and Conservative Holdings will have accounted for their first-quarter 2010 activities; Just Energy Income Fund (TSX: JE-U, OTC: JUSTF) is tentatively scheduled to release its numbers on May 20.

Aggressive Holdings

Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF) reported year-over-year increases in distributable cash after maintenance capital expenditures, EBITDA (earnings before interest, income taxes, depreciation and amortization) and net earnings. Revenue was CAD126.8 million, down from CAD161.8 million a year ago because of lower prices for sulfuric acid and the stronger Canadian dollar relative to the US dollar, which hurt US dollar-denominated revenues.

Distributable cash after maintenance capital expenditures was CAD14.9 million (CAD0.49 per unit), up from CAD9.6 million (CAD0.11 per unit) a year ago. Chemtrade paid out CAD9.2 million at CAD0.30 per unit during the quarter, for a payout ratio of 61.6 percent.

In its statement accompanying the earnings release management pointed to a rebound in global economic activity as the primary factor behind its first-quarter success. Although prices for sulfuric acid were off from year-ago levels, the overall supply/demand picture, according to Chemtrade management, has stabilized.

Chemtrade’s healthy balance sheet, access to capital and resilient business are an ideal combination for a sustainable dividend. Chemtrade Logistics Income Fund is a buy up to USD12.

Newalta (TSX: NAL, OTC: NWLTF) reported first-quarter 2010 numbers that “dramatically improved” upon results from a year ago. Newalta’s top and bottom lines grew along with activity across the automotive, forestry, mining and transportation industries.

Revenue increased 17 percent, net earnings rose 231 percent and adjusted EBITDA rocketed 145 percent on a reviving economy, reduced costs and higher prices for the commodities Newalta recovers from its industrial clients.

“Results in the second quarter are expected to be much improved over last year,” noted CEO Al Cadotte, “and the outlook for the second half of the year is very positive.”

Revenue and net margin in the Facilities Division rose 19 percent and 105 percent, respectively, due to higher commodity prices, increased landfill volumes and greater output from the Ville Ste-Catherine lead production facility. The Onsite Division reported revenue (11 percent) and net margin growth (100 percent) as well, with increased drilling activity and higher oil prices driving results. Combined net margin increased 104 percent. Management anticipates second-quarter comparisons will look equally impressive, as crude oil and lead prices continue to trend well above year-ago levels. More importantly, demand for Newalta’s services is expected to remain steady through 2010, as are favorable commodity prices.

Newalta, an emerging leader in the Canadian industrial cleanup space, is a buy up to USD10.

Paramount Energy Trust (TSX: PMT-U, OTC: PMGYF) posted strong first-quarter results despite continued weakness for spot natural gas prices as an effective hedging strategy allowed the company to post solid funds flow from operations.

Paramount’s realized price increased 51 percent to CAD9.78 per thousand cubic feet (Mcf) from CAD6.46 a year ago. Funds flow increased to CAD84.4 million (CAD0.66 per unit) from CAD41.2 million (CAD0.36 per unit), primarily due to realized gains on hedging contracts that totaled CAD56.4 million. Distributions paid during the quarter equaled CAD0.15 per unit, for a payout ratio of 22.7 percent.

Production for the quarter increased 2 percent sequentially to 149.2 million cubic feet per day (MMcf/d) compared to 145.9 MMcf/d in the fourth quarter. Compared to the first quarter of 2009 production was off nearly 11 percent on the impact of a greatly reduced development budget for 2009, non-core asset sales and voluntary shut-ins. The Profound acquisition partially offset these drags. Paramount Energy Trust is a buy up to USD6.

• Ag Growth International (TSX: AFN, OTC: AGGZF)–May 13 (confirmed)
• Peyto Energy Trust (TSX: PEY-U, OTC: PEYUF)–May 13
• Provident Energy Trust (TSX: PVE-U, NYSE: PVX)–May 13 (confirmed)
• Trinidad Drilling (TSX: TDG, OTC: TDGCF)–May 12 (confirmed)

Conservative Holdings

Innergex Renewable Energy (TSX: INE, OTC: INGXF), as detailed above, turned in solid first-quarter results. Innergex Renewable Energy is a buy up to USD12.

Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF) reported a 1.6 percent up-tick in first-quarter operating revenue. Normalized funds from operations (NFFO), which excludes the effects of financial instruments and other non-recurring expenses, rose to CAD20 million (CAD0.30 per unit) from CAD16.5 million (CAD0.25 per unit) a year ago. The payout ratio based on NFFO was 93.3 percent, down from 111.3 percent for the first quarter of 2009.

Net operating income (NOI) was up 9.8 percent, while NOI margin increased to 52.2 percent from 48.3 percent. Average monthly rents increased by 1.8 percent, with steady increases in all markets except Alberta. Occupancy increased to 97.8 percent from 97.3 percent at the end of the first quarter of 2009.

Total debt-to-gross book value was 63.22 percent at quarter’s end, well below the 70 percent upper bound established by the REIT’s trust declaration but up slightly from 62.75 percent at Dec. 31, 2009.

Subsequent to quarter’s end CAP REIT announced the purchase of a 162-suite luxury apartment building in British Columbia for CAD37.5 million, funded by the assumption of a CAD22.7 million, 4.59 percent first mortgage and from existing credit facilities. Management has also inked a deal to buy another luxury apartment property comprising 199 suites outside Toronto for CAD31 million; the REIT will assume a CAD23.3 million first (it didn’t disclose the rate) and put the rest on its credit facility.

In addition, CAP REIT is selling a 146-suite property in Ontario for CAD7.6 million; net proceeds, expected be about CAD1.5 million, will be used to pay down debt. Canadian Apartment Properties REIT is a buy up to USD15.

Macquarie Power & Infrastructure Income Fund (TSX: MPT-U, OTC: MCQPF) reported a 9.6 percent increase in revenue, reflecting higher power rates at the Cardinal cogeneration facility, back-to-normal performance at Whitecourt after maintenance downtime hampered the prior year’s first-quarter tally and higher water flows at hydro facilities offset lower-than-average wind speeds at the Erie Shores wind farm.

The fund also realized a net cash gain of CAD50 million from its sale of its 45 percent interest in the Leisureworld long-term care facility. In the words of CEO Michael Bernstein, “The fund is now well positioned to pursue growth in core infrastructure categories such as power generation, distribution and transmission, and utilities and transportation.”

Revenue for the first quarter was CAD44.2 million, up from CAD40.3 million a year ago, largely on a 1.6 percent increase in electricity output. The Whitecourt biomass facility posted fewer outage hours, while favorable hydrology offset unfavorable wind conditions. In addition, the Cardinal cogeneration facility received higher prices under its PPA and a CAD1.8 million rate adjustment from Ontario.

Distributable cash for the quarter was CAD14.7 million (CAD0.295 per unit), down slightly from CAD15 million (CAD0.30 per unit) because of the Leisureworld transaction and higher administrative and interest expenses. The fund declared distributions of CAD8.2 million (CAD0.165 per unit), down from CAD13.1 million (CAD0.262 per unit), for a payout ratio of 56 percent.

Management “expects to maintain stable distributions to unitholders of CAD0.66 per unit through 2014 based on its current portfolio. This distribution level is expected to result in an average payout ratio of approximately 70 to 75 percent of distributable cash over a five-year period. As a result of the divestment of Leisureworld, the 2010 payout ratio is anticipated to be above 80 percent.” Macquarie Power & Infrastructure Income Fund is a buy up to USD8.

Northern Property REIT (TSX: NPR-U, OTC: NPRUF) reported that conditions continued to improve across four of its five operating regions during the first quarter, and according to CEO Jim Britton, “We are now beginning to see some steady improvement in northern Alberta as oil patch activity picks up.”

Total revenue for the period was CAD33.9 million, down slightly from CAD34 million a year ago. NOI was CAD20.8 million, down from CAD21.3 million, while FFO was CAD12.7 million compared to CAD13.5 million. Northern reported a first-quarter payout ratio of 74.3 percent, up from 69.6 percent a year ago.

Northern began to observe an improvement in multi-family rental conditions during the fourth quarter of 2009, and this trend continued into 2010. While overall apartment vacancy declined to 7.3 percent from 8.7 percent at December 31, it’s still above the 6.1 percent recorded at the end of the first quarter of 20009. Northern Property REIT is a buy up to USD22.

• Artis REIT (TSX: AX-U, OTC: ARESF)–May 12 (confirmed)
• Atlantic Power Corp (TSX: ATP, OTC: ATLIF)–May 14 (confirmed)
• Bird Construction Income Fund (TSX: BDT-U, OTC: BIRDF)–May 13
• Brookfield Renewable Power Fund (TSX: BRC-U, OTC: BRPFF)–May 12 (confirmed)
• Just Energy Income Fund (TSX: JE-U, OTC: JUSTF)–May 20 (tentative)
• Keyera Facilities Income Fund (TSX: KEY-U, OTC: KEYUF)–May 12 (tentative)