Canadian income trusts–OK, high-yielding Canadian corporations–continue to build wealth at a market-beating clip. And the “long-term converted”–or those that affected their going-corporate transactions before Jan. 1, 2011, and this is admittedly a rather crude delineation–have clearly outperformed major benchmarks

Working on a total-return basis, 45 of the 76 income trusts in the Canadian Edge How They Rate coverage universe that converted have outperformed both the S&P 500 and the S&P/Toronto Stock Exchange Composite Index since becoming corporations, some spectacularly. (Canadian Edge subscribers, who see a premium version of this zine that includes a regular summary of Portfolio news and coverage universe developments, can see the raw data in tabular form in this week’s Roundup; look for a table, in three parts, called “Numbers that Matter” in CE Weekly, the subscribers’ version of Maple Leaf Memo.)

There are many reasons to explain the difference in performance and why many of the high-dividend-paying stocks in the CE coverage universe have fared better than the overall market. Fifteen of them–related to the strength of the Canadian dollar, or loonie–are detailed below. Without consulting the numbers it’s fair to conclude that underlying the vast majority of these wealth-builders–allowing for the better-to-be-lucky-than-good anomaly–are strong businesses capable of surviving, even thriving, under all macro conditions.

Advantage Oil & Gas Ltd (TSX: AAV, NYSE: AAV), which converted in July 2009, is 85.3 percent to the positive, and that’s all capital gains for a company that opted for an aggressive growth campaign focused on its promising Montney Shale assets over the rigors of maintaining a dividend when it became a corporation. The S&P 500 is up 52.9 percent over a comparable time frame, while the S&P/TSX, lifted by the loonie, is up 79.9 percent.

Advantage converted shortly after Western markets bottomed in March 2009. It was helped by rising general sentiment, though its new, aggressive orientation also impressed analysts. Bay Street remains bullish, with six “buy” ratings, three “holds” and zero sells. Advantage won’t report full-year and fourth-quarter 2010 earnings until mid-March, at which time we’ll have more information about how low natural gas prices are impacting the company.

Crescent Point Energy (TSX: CPG, OTC: CSCTF) has turned in an even more impressive 104.2 percent return since converting around the same time as Advantage.

Superior Plus Corp (TSX, SPB, OTC: SUUIF), a propane distributor with chemical, construction and natural gas interests, made the switch as 2008 turned into 2009. It’s 72.6 percent total return matches the S&P/TSX for a comparable time frame; both top the S&P 500’s 51.6 percent return. Newalta (TSX: NAL, OTC: NWLTF), which recovers and recycles marketable material from industrial waste, is up 170.8 percent to 109.2 percent for the S&P/TSX and 51.6 percent for the S&P 500 since Dec. 31, 2008.

IESI-BFC (TSX: BIN, NYSE: BFC), an expanding solid waste collector/landfill operator with a presence on both sides of the border, converted on Oct. 2, 2008; it’s up 70.7 percent since. The S&P 500 is up 23.9 percent, the S&P/TSX 54.5 percent.

From May 14, 2008, the date its conversion became official, according to a company press release, through Mar. 1, 2011, TransForce Inc (TSX: TFI, OTC: TFIFF), a member of the CE Portfolio since November 2007, generated a total return of 116.6 percent in US dollar terms. TransForce, even 16 months after the Oct. 31, 2006, Halloween Nightmare, was still among the first income trusts to convert ahead of entity-level taxation on Jan. 1, 2011.

As you’ll recall, the broader market had buckled at the time of TransForce’s conversion. The S&P had given back about 9 percent after notching a decade high the previous October.

But in the fall of 2008 Mr. Market finally keeled over and didn’t completely settle until March 2009. The financial crisis morphed into an economic downturn unlike any other in the last 80 years, felling former stalwarts of finance such as Lehman Brothers as well as countless small businesses. Access to credit–and on what terms–became the primary litmus test for survival in 2008 and 2009. And TransForce fared well.

TransForce’s income trust-level distribution peaked at CAD0.1325 per unit with the April 2007 payment. The company modified its payout policy upon conversion, making two pro rata payments, of CAD0.06625 and CAD0.05 per unit, before establishing a CAD0.10 per share per quarter rhythm with the October 2008 payment. The current CAD0.40 per share annualized dividend represents a 75 percent reduction from the CAD1.59 TransForce was paying before it converted.

We held it in the CE Portfolio until late 2006, when aggressive issuance of new units into the teeth of a slowing economy threatened the sustainability of the payout. We sold it from the Portfolio, but then added it back in late 2007, after it traded into value range. During its second stay in the CE Portfolio–accounting for a bigger time frame than the simple post-conversion period, TransForce is up more than 66 percent to the S&P/TSX’s 4 percent gain and the S&P 500’s 4.6 percent loss. Standing back even further, for the five years ended Mar. 1, 2011, TransForce has returned 32 percent, the S&P/TSX 60 percent, the S&P 500 12 percent.

The full set of statistics on TransForce vs. the market can be pulled apart and put back together to fit whatever mosaic you have in mind. It doesn’t take much staring, however, to realize a couple key points. First, TransForce the stock, from a US investor’s perspective, has been a solid proposition using almost any time frame. That has a lot to do with the fact that it’s a resilient company operating in a key space in the economy.

TransForce was able to use the capital it raised in 2006 and later, when borrowing rates approached historic lows, to expand its footprint in what remains a fragmented industry. In December 2010 it completed the CAD248 million purchase of logistics and delivery firm Dynamex to become the No. 15 transporter in North America.

Second–and this is apparent across the coverage universe–Canada’s emergence as a unique economy in the 21st century makes the loonie more than just a “petrocurrency.” It is a strong currency, and it is backed by copious resources, including oil as well as gold and potash, and all this will support the distributions paid by Canadian income trusts and the high-yielding corporations that have succeeded them. Canada, in other words, is the ultimate hedge, for all these reasons, and for those detailed, conveniently, below.

Canadian Income Trusts, Building Wealth and the Loonie

David Rosenberg is the chief economist for Gluskin Sheff + Associates. He used to be the top strategist at Merrill Lynch, before that outfit nearly imploded, but he was chased away because of his excessive bearishness ahead of the disaster that unfolded from 2007 to early 2009. He writes one of the snappiest pieces of research in the business every morning, “Breakfast with Dave,” though sometimes it’s “Lunch” or “Tea and Crumpets.”

On Wednesday, Mar. 2, Mr. Rosenberg shared his list of 15 reasons to love the Canadian currency, known as the loonie. Many of these are familiar points to long-term MLM readers, but never have they been organized so succinctly. Here’s the case for the loonie and, by extension, the case for Canadian income trusts and their high-yielding progeny:

FIFTEEN REASONS TO LOVE THE LOONIE (WE COULDN’T STOP AT TEN!)

1. Better growth than the U.S. and without need for stimulus

2. Responsible central bank, limiting growth in its balance sheet

3.  Better fiscal backdrop

4. More conservative political environment

5. Triple the exposure to raw material than the U.S.

6. Investors get 115 basis points premium over Treasuries at the front end of the government yield curve

7. Canada in the top 15 net oil exporters globally … U.S. top importer

8. TSX dividend yield at 2.36%; S&P 500 dividend yield at 1.82%

9. Housing market in balance in most of the metro areas; no foreclosure supply coming

10. Inflation is low and stable with minimal risk of deflation

11. Economic recovery being fuelled principally by business spending

12. Corporate tax rates on a sliding scale down

13. Immigration and capital flows running at record levels

14. Vancouver rated top city in the world to live

15. Stable banking system with consistent dividend growth

The Roundup

As promised above, below (in three parts) is the table “Numbers that Matter,” which includes total return data (capital gains plus dividends/distributions) from the date an income trust’s conversion became official (according to company press releases) through Mar. 1. Dates for the companies that converted en masse as 2010 turned to 2011 are standardized to Jan. 1.

Five of Canada’s Big Six banks have reported fiscal 2011 first-quarter (ended Jan. 31) results as of Friday.

Canadian Imperial Bank of Commerce (TSX: CM, NYSE: CM) led off reporting with the announcement of a 22.5 percent increase in quarterly net income, to CAD799 million (CAD1.92 per share) from CAD652 million (CAD1.58 per share) a year ago. Cash earnings were CAD1.94 per share, up from CAD1.60.

Loan-loss provisions declined 42 percent to CAD209 million from CAD359 million a year earlier on lower writeoffs in its credit card and personal lending portfolios and lower provisions in commercial banking. Net interest income rose 6 percent on volume growth for most retail products. Retail, which includes personal banking, business banking and wealth management, contributed CAD627 million to earnings, up CAD100 million from a year earlier. Revenue from the group was up 6 percent. Investment banking contributed CAD136 million to earnings, down from CAD184 million a year earlier on losses in the structured credit run-off business. Revenue overall in the division was also lower, though capital-markets revenue improved slightly due to higher revenue from derivatives trading and equity sales.

As at Jan. 31 CIBC’s Tier 1 capital ratio was 14.3 percent, up from 13 percent. CIBC, like its peers, is trading at post-March 2009 highs; we’ll wait for stronger dividend growth until moving off a “hold” rating.

Bank of Montreal (TSX: BMO, NYSE: BMO) reported Mar. 1 that net income for the first quarter was up 18 percent to CAD776 million (CAD1.30 per share) from CAD657 million (CAD1.12 per share) a year ago. Cash earnings were CAD1.32 per share, up from CAD1.13. Revenue increased 11 percent to CAD3.35 billion.

Loan-loss provisions declined 26 percent, while personal and commercial revenues in Canada remained robust, rising 9 percent. Rallying equity markets boosted mutual fund sales and underwriting activity, while; profit at its investment bank jumped 21 percent on higher trading revenue and merger and acquisition advisory and underwriting fees.

BMO agreed in December to buy ailing Wisconsin lender Marshall & Ilsley Corp (NYSE: MI) for CAD4.1 billion in stock, a deal that will more than double its US branches to almost 700 and give it an American footprint as large as its Canadian presence. The acquisition is expected to close in the third quarter. BMO’s Basel III pro-forma common equity ratio is an estimated 8.2 percent as at Jan. 31, 2011. Bank of Montreal is a hold.

Toronto-Dominion Bank (TSX: TD, NYSE: TD) boosted its dividend to CAD0.66 per share from CAD0.61 when it announced earnings this week, becoming the first of the old Big Five to join upstart National Bank of Canada (TSX: NA, OTC: NTIOF) among payout increasers in the post-Great Recession world.

TD’s adjusted retail earnings–from Canada, the US, global wealth management and its online broker TD Ameritrade–hit a record CAD1.4 billion, up 30 percent from year-earlier total. Canadian personal and commercial banking posted earnings of CAD905 million, up 26 percent. Loan growth rose 8 percent, while deposits grew 7 percent. Provisions for credit losses fell 32 percent, reflecting a 26 percent decline in personal bankruptcies from a year ago and an improved jobs picture. Residential mortgage growth remains strong. Pricey like its peers, despite the dividend increase, Toronto-Dominion Bank is a hold.

Royal Bank of Canada (TSX: RY, NYSE: RY) beat analysts’ expectations for the first time in six quarters on Friday, as reported first-quarter net income rose 23 percent to a record CAD1.84 billion (CAD1.24 per share). Loan-loss provisions declined, and the bank enjoyed solid activity in investment banking and underwriting. Cash earnings were CAD1.26 per share, beating a forecast of CAD1.01 per share. Royal Bank of Canada, which has surged north of USD61, is a buy anytime it trades below USD55.

National Bank, which was the first of the Big Six to hike its dividend in the aftermath of the credit crunch/financial crisis/economic downturn, posted a record profit of CAD312 million (CAD1.80 per share) in the first quarter on revenue of CAD1.1 billion. Bank of Nova Scotia (TSX: BNS, NYSE: BNS), our top pick among the Big Six because of its Latin American and Asian exposure, will announce fiscal first-quarter 2011 results on Mar. 8.

Here’s a summary of earnings reporting dates for Canadian Edge Portfolio companies. Consult the March Portfolio Update and the Feb. 23 Flash Alert for commentary on those that have announced through Mar. 3.

We’ll have more on those yet to reveal numbers in the days ahead.

Aggressive Holdings

• Ag Growth International (TSX: AFN, OTC: AGGZF)–Mar. 14 (confirmed)
• ARC Resources Ltd (TSX: ARX, OTC: AETUF)–Feb. 10 (announced)
• Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF)–Feb. 23 (announced)
• Daylight Energy Ltd (TSX: DAY, OTC: DAYYF)–Mar. 2 (announced)
• EnerCare Inc (TSX: ECI, OTC: CSUWF)–Feb. 23 (announced)
• Enerplus Corp (TSX: ERF, NYSE: ERF)–Feb. 25 (announced)
• Newalta Corp (TSX: NAL, OTC: NWLTF)–Mar. 3 (announced)
• Parkland Fuel Corp (TSX: PKI, OTC: PKIUF)–Mar. 14 (confirmed)
• Penn West Petroleum Ltd (TSX: PWT, NYSE: PWE)–Feb. 18 (announced)
• Perpetual Energy (TSX: PMT, OTC: PMGYF)–Mar. 8 (confirmed)
• Peyto Exploration & Development Corp (TSX: PEY, OTC: PEYUF)–Mar. 9 (confirmed)
• PHX Energy Services Corp (TSX: PHX, OTC: PHXHF)–Mar. 3 (?)
• Provident Energy Ltd (TSX: PVE, NYSE: PVX)–Mar. 9 (confirmed)
• Vermillion Energy Inc (TSX: VET, OTC: VEMTF)–Feb. 28 (announced)
• Yellow Media Inc (TSX: YLO, OTC: YLWPF)–Feb. 10 (announced)

Conservative Holdings

• AltaGas Ltd (TSX: ALA, OTC: ATGFF)–Feb. 24 (announced)
• Artis REIT (TSX: AX-U, OTC: ARESF)–Mar. 2 (announced)
• Atlantic Power Corp (TSX: ATP, NYSE: AT)–Mar. 18 (confirmed)
• Bird Construction Inc (TSX: BDT, OTC: BIRDF)–Mar. 4 (announced)
• Brookfield Renewable Power Fund (TSX: BRC-U, OTC: BRPFF)–Feb. 16 (announced)
• Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF)–Feb. 22 (announced)
• Cineplex Inc (TSX: CGX, OTC: CPXGF)–Feb. 10 (announced)
• CML Healthcare Inc (TSX: CLC, OTC: CMHIF)–Mar. 4 (announced)
• Colabor Group (TSX: GCL, OTC: COLFF)–Mar. 7 (confirmed)
• Davis + Henderson Income Corp (TSX: DH, OTC: DHIFF)–Mar. 8 (confirmed)
• IBI Group Inc (TSX: IBG, OTC: IBIBF)–Mar. 17 (estimated)
• Innergex Renewable Energy (TSX: INE, OTC: INGXF)–Mar. 23 (confirmed)
• Just Energy Group Inc (TSX: JE, OTC: JSTEF)–Feb. 10 (announced)
• Keyera Corp (TSX: KEY, OTC: KEYUF)–Feb. 17 (announced)
• Macquarie Power & Infrastructure Corp (TSX: MPT-U, OTC: MCQPF)–Mar. 10 (confirmed)
• Northern Property REIT (TSX: NPR-U, OTC: NPRUF)–Mar. 9 (confirmed)
• Pembina Pipeline Corp (TSX: PPL, OTC: PBNPF)–Mar. 3 (announced)
• RioCan REIT (TSX: REI-U, OTC: RIOCF)–Feb. 28 (announced)
• TransForce (TSX: TFI, OTC: TFIFF)–Mar. 2 (announced)