Two years ago this week the S&P 500, the S&P/Toronto Stock Exchange Composite Index (S&P/TSX) and the S&P/TSX Income Trust Index (SPRTCM) were in the very early stages of what’s proven to be an historic rally. On Friday, Mar. 6, 2009, the SPRTCM hit a closing low of 75.90, while the two broader indices reached their respective nadirs the following Monday, Mar. 9, at 676.53 for the SPX and 7,566.94 for the SPTSX.

Shortly before noon Friday morning, the S&P 500 is at 1,295.48, the S&P/TSX 13,671.03; on Dec. 31, 2010, the last day it provided a broad view of income trusts rather than the limited, REIT-dominated universe it now tracks, the SPRTCM closed at 145.14. That’s a 91.5 percent, closing low-to-intraday rally for the S&P 500 and an 80.7 percent run for the S&P/TSX. The SPRTCM jumped 91.2 percent before it was forever changed by the conversion process.

You might–might–be able to count on one hand the number of your acquaintances who had the prescience to go all-in at those levels. Whether Mar. 6-to-Mar. 9 was a bottom or the bottom is a matter of infinite variables; nobody could know ahead of or at the time that it would be the starting point for one of the biggest rallies in decades. Those who did buy practiced one discipline common among successful investors: They moved to capitalize on the herd’s fear.

Obviously this extreme kind of cold-hearted contrarian is rare. Dividend investing, however, doesn’t require you to be that awesome. But building wealth over time does require you to stick to your own discipline. Sometimes it’s better to be lucky than good, but those who benefit from fortune have often put themselves in position to do so. It helps to eliminate as many variables as possible, in other words, a process that starts almost at the very beginning, very close to home.

The Greek aphorism “know thyself”–according to legend inscribed on the forecourt of the Temple of Apollo at Delphi–has beguiled many philosophers through the ages, including Plato, Alexander Pope and Ralph Waldo Emerson. It’s also great advice for investors of all ages: Know what kind of risk you can tolerate, how you respond to fear, how you perceive opportunity, what you’re trying to accomplish, and when you’d like to do it.     

How to Get Started in High-Yield Canada

The market’s reaction Friday to the earthquake off Japan and ensuing Tsunami impacting virtually the entire Pacific basin was encouraging, to say the least, given the geopolitical fissures exposed by rippling revolution across the Middle East North Africa (MENA) region. North America is in the green, reflecting perhaps some risk-aversion, but a good sign nonetheless in light of overnight action in Asia and a day’s trading in Europe.

Making an investment decision, however, boils down to what’s happening at the company level and how that relates to the share price. Do current operations support a regular payout to investors, and how much room is there to spare? Is management laying the foundation for future dividend growth, and how much should I pay to get a piece of it? These are relevant questions at all times for dividend investors.

To the more exciting question of where to put investible assets right now Canadian Edge provides two answers every month, via the High Yield of the Month feature, generally one from the CE Portfolio’s Aggressive Holdings and one from the Conservative Holdings. Building a portfolio is simply a matter of buying the two recommendations found in this space, or choosing one that may be more suitable to your investing goals.

As it happens, CE did make two “buy” calls on Mar. 6, 2009, the very day the SPRTCM bottomed. CE is published on the first Friday of the month (unless that Friday falls on the first or second), so by mere operation of the calendar recommendations had to be made. But the March 2009 High Yield of the Month selections, Enerplus Resource Fund, which has since converted into Enerplus Corp (TSX: ERF, NYSE: ERF), and Northern Property REIT (TSX: NPR-U, OTC: NPRUF), impacted minimally by the Tax Fairness Act, have demolished the S&P 500 on a total return, US-dollar-terms basis.

Both have enjoyed significant share-price gains, rising along with the rest of the market. Both have also paid stable dividends, Enerplus CAD0.18 per share per month every month since February 2009, while Northern Property paid CAD0.1233 per unit per month until it bumped up to CAD0.1275 in September 2010.

There’s no question it was easier to find values two years ago. As we begin year three of this historic rally the field of stocks trading below value-based buy targets is thinner, but that doesn’t change the discipline. If you don’t chase yield for the sake of yield and if you don’t pay too much for any given stock, it doesn’t matter whether you spot the bottom.

Now trading in the USD30s, where it still yields more than 7 percent, Enerplus is still, at these levels, a good candidate for dividend investors focused on long-term wealth-building. So is Northern Property, which is in buy-target range after its strong push; this conservative REIT is a great way to lock in 5.5 percent.

The Roundup

The last of Canada’s Big Six–and CE’s favorite among the group–reported net income for its fiscal 2011 first quarter (ended Jan. 31) grew 18 percent on a per-share basis to CAD1.07, and Bank of Nova Scotia (TSX: BNS, NYSE: BNS) also boosted its dividend by 6.1 percent to CAD0.52 per share.

Cash earnings of CAD1.09 per share beat a consensus estimate of CAD1.06 and were up from CAD0.93 a year earlier. Overall net was up 19 percent to CAD1.174 billion, a quarterly record for Scotiabank. Revenue was CAD4.2 billion; acquisitions accounted for roughly half of the CAD215 million increase. Loan-loss provisions were down 28 percent year over year to CAD269 million, driven by improved credit quality at Scotiabank’s Asian and Latin American operations.

The bank also benefited from a lower-than-expected tax rate and racked up higher expenses from acquisitions, higher stock-based compensation and pension costs. Overall, however, these numbers–particularly the dividend increase, the third by a Big Sixer since the end of the Great Recession–support the proposition that Canada’s are the best banks in the world right now.

Like its peers Scotiabank is enjoying the strong foundation its home market provides, as Canadians continue to borrow and spend. Net income from domestic consumer banking grew 14 percent to CAD496 million, driven by 9 percent growth in residential mortgages and a 2 percent increase in other consumer loans. Average deposits grew 3 percent.

Results across the bank’s operating segments were solid, as earnings from international banking grew 35 percent to CAD342 million on retail and commercial loan growth and contributions from recent acquisitions in Puerto Rico and Thailand.

The wealth management business, including mutual fund sales, generated earnings of CAD216 million, an increase of 18 percent. The only negative: Net income from investment banking declined 19 percent to CAD308 million, on lower revenue and higher compensation costs, as bonuses earned in prior quarters came due this period.

Scotiabank has considerably more international exposure than do its peers, most of which are concentrating their growth efforts on the US. Scotiabank’s orientation still smacks of greater risk to most Street analysts, but during the first quarter of fiscal 2011 personal banking in Canada and at its branches in Asia and Latin America were bright spots. Provisions for credit losses declined to CAD269 million from CAD371 million on a stronger global economy. Domestic set asides were down 10 percent, while management reduced international provisions by 65 percent, due mostly to better performance from commercial portfolios in the Caribbean and Peru and lower retail provisions in Mexico.

As of Jan. 31 Scotiabank’s Tier 1 capital ratio was 11.8 percent. Bank of Nova Scotia–now paying a CAD0.52 per share dividend, up 6 percent from CAD0.49–is a buy up to USD60.

Here’s a summary of earnings reporting dates for Canadian Edge Portfolio companies. Consult the March Portfolio Update, the Feb. 23 Flash Alert and the Mar. 10 Flash Alert for commentary on those that have announced through Mar. 10.

We’ll have one more Flash Alert to wrap up coverage of those yet to announce–Aggressive Holdings Ag Growth International (TSX: AFN, OTC: AGGZF) and Parkland Fuel Corp (TSX: PKI, OTC: PKIUF) and Conservative Holdings Atlantic Power Corp (TSX: ATP, NYSE: AT) and IBI Group Inc (TSX: IBG, OTC: IBIBF)–next week.

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 (announced)
• Peyto Exploration & Development Corp (TSX: PEY, OTC: PEYUF)–Mar. 9 (announced)
• PHX Energy Services Corp (TSX: PHX, OTC: PHXHF)–Mar. 3 (announced)
• Provident Energy Ltd (TSX: PVE, NYSE: PVX)–Mar. 9 (announced)
• 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 (announced)
• Davis + Henderson Income Corp (TSX: DH, OTC: DHIFF)–Mar. 8 (announced)
• 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 (announced)
• Northern Property REIT (TSX: NPR-U, OTC: NPRUF)–Mar. 9 (announced)
• 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)