Here’s an old saying that applies to investing just as much as the New York-Washington commute via Amtrak: There’s always another train leaving the station; you just may have to wait a little longer than you like to catch it.

With so many Canadian Edge Portfolio holdings trading above buy targets, it’s absolutely critical to keep this in mind. You don’t do yourself any favors by chasing stocks, and that goes double if you’re buying for income.

At best, paying too much just means you’ll lock in an inferior yield and therefore less-than-optimal total return. At worst, you’ll buy near a top and have to ride the stock all the way down to get back up, or else cash out and eat the loss in hopes of buying back another day.

As I point out in this month’s Feature Article, sizeable drops are an increasing possibility for many stocks, as expectations in the market rise ahead of what many companies are capable of delivering. In fact, it’s arguably the strongest that are increasingly most vulnerable to unexpected and jarring drops, as too many investors try to protect themselves with stop-losses or else lever up to extract even more gains–turning mild down days into selling frenzies.

Bird Construction (TSX: BDT, OTC: BIRDF) now sits near a 52-week high, after reporting solid fourth-quarter earnings and a 10 percent dividend increase. Its infrastructure construction franchise weathered the crippling North American credit crunch/recession by developing an expertise grabbing public-sector contracts. Now it’s gearing up to snag a lion’s share of emerging private-sector business, particularly in reviving oil sands development.

All that strength, however, couldn’t save the stock from a one-day plunge on Nov. 9, 2010, that took it from USD38 to USD28 and back to USD33 at close. Nor have solid underlying businesses and secure, growing dividends prevented waterfall drops in stocks of other high-quality Canadian stocks in recent months.

The silver lining of these declines is, of course, that they’ve been extremely short-lived. Bird, for example, was back in the saddle and hitting a new high just a few months later, even before it announced what were solid fourth-quarter earnings. There was no news, but buyers recognized quality and came back.

The only losers from such action are those who are flushed out by the market event itself. If enough stop-losses are set at or near the same level, for example, they can become a flood of sell orders that will overwhelm any bids in the market, at least temporarily. In a worst-case they get executed at prices well below where the stops were set, leaving investors to watch the stocks quickly rebound to higher levels once the wave crests.

Investors trying to augment dividend income by selling call options (a right to buy at a specific price) against stocks are technically protected on the downside by the option “premium,” essentially the cash they received for selling the option.

Those selling put options (a right to sell at a set price), however, are essentially making a double-bullish bet that may force them to sell a falling stock to cover losses on the option. They’ll incur a tax liability and potentially huge losses as well, if each option isn’t backed by 100 shares of stock. Most dangerous of all is if an investor doesn’t pay attention at all times to their options positions, and the sold put continues to rise in value even as the stock’s price falls.

The upshot: Unless you’re very careful and really know what you’re doing, you’re better off not leveraging your returns in high-yielding Canadian stocks with options. Nonetheless, many market participants ignore that rule. And those who position themselves foolishly and are forced to sell into downward price spikes only increase the day’s downside volatility.

Thankfully, fourth-quarter earnings season didn’t dish out anything quite as breathtaking as what happened to Bird Construction in November. Some stocks did decline in the wake of missing an earnings number. But for the most part the action was fairly orderly.

Unfortunately, that wasn’t the case throughout the How They Rate coverage universe. And it certainly wasn’t the case for many other high-yielding equity sectors. Consequently, my view is we’ll see more Bird-like situations going forward in 2011, and even the strongest CE Portfolio holdings are vulnerable.

The question is, should we do anything different given the nature of the risk and the fact that the biggest winners of the past two years are likely the most vulnerable stocks, owing to the misperception that stop-losses really protect profits? How much should we protect against this emerging variety of volatility?

As I point out in the Feature, my view is still that we’re going to make the most money long term by investing in companies, not by trying to out-guess a market that’s afraid to be in stocks but also terrified to be out of them. There are times when it makes sense to sell, and fast. But this type of selloff by its nature is a short-term phenomenon.

You can pre-empt downside volatility to some extent by taking money off the table in stocks you own that have made big gains, or which have grown to inordinately large percentages of your portfolio. And you can guard against real meltdowns by selling when a company’s underlying business seems to weaken.

On the other hand, however, there’s little to be gained by selling into a downturn that’s caused by inherently ephemeral factors. If a stock is down because too many people set stop-losses or levered up their positions at the same time, the damage will be done before you have a chance to react. In fact, the rebound may have happened before you’ve noticed.

The best course, however, isn’t to run away from share-price volatility in companies with strong underlying businesses. Don’t try to protect yourself with stop-losses. Rather, use the trend to your advantage.

Even the strongest companies aren’t immune from volatility. No investment is, outside of money-market funds. But as long as the underlying companies’ prospects are strong, you have nothing to fear about the dividend. And the dividend, along with dividend growth, is ultimately what will set the price of the stock.

In other words, you can hold stocks of strong companies in the throes of volatility with confidence they’ll swiftly recover any losses they occur. Moreover, you can also buy them with confidence, particularly at the pricing extremes.

This then is the crux of my strategy for catching runaway trains here in early 2011: Set buy limit orders at “dream prices,” or levels so low they look now like the stuff of dreams.

A “buy limit order” is basically a buy order that’s only executed if a stock hits a certain price. Most of the time you’re not going to get executed and your order will lie dormant. But if you are executed, you’ll invariably be taking a position in a great company at a price that almost guarantees a robust return, as long as the underlying business continues to perform.

Of all the companies we track in Canadian Edge, I have the most confidence in the Portfolio companies to hold up come what may. That’s in part due to their solid performance during the 2008-09 debacle, the worst credit crunch/market decline/economic contraction in 80 years. It’s also because of the way they continue to perform as businesses now, using current conditions to lay ever-stronger foundations for long-term wealth-building.

As a result, I have the utmost confidence to put in place a strategy setting up what amounts to automatic buys if certain price levels are reached. I’m content to be patient and I realize I may never be executed. But if the prices do drop that far, I’m confident they’ll rebound by nature of their strong underlying businesses.

My buy targets are set at levels that ensure solid value, determined by a balance of return (sum of dividends and dividend growth) and safety (the CE Safety Rating System). If you buy below those levels, I’m confident you’ll be rewarded with annual returns of 10 to 15 percent for Conservative Holdings and 20 percent and up for Aggressive Holdings, for years to come.

But if you’re executed at the dream prices I recommend below, your returns will be several times that. In fact, you’ll be locking in the same kind of explosive gains we’ve seen the last two years. That’s the surest road to a hat trick of a third straight year of outsized gains in Canadian stocks.

In fact it’s very likely the only way there.

Dream Buys

Here’s a stock-by-stock look at Canadian Edge Portfolio, starting with the Conservative Holdings and moving onto the Aggressive Holdings and finally the Mutual Fund Alternatives.

I’ve noted and linked to the Flash Alert or regular CE issue and article where I reviewed their fourth-quarter and full-year 2010 earnings release; these articles and commentary are all stored on the Canadian Edge website. The March Feature Article and Portfolio Update can be found under the Articles tab, while the Flash Alerts are listed in chronological order under Alerts.

My focus below, however, is on three things: one, the most important potential catalysts for cash flow and dividend growth for 2011 and beyond; two, the risks that could derail their progress and, in a worst-case, induce me to sell them; and, three, what level of “dream price” would merit a buy limit order, should volatility trigger a one-day waterfall drop.

Again, note that dream prices are a wholly different animal than my buy targets. The latter are set by comparing prospective return–current yield plus potential dividend growth–to safety, essentially the reliability of revenue and dividends. They’re levels where buyers can be comfortable they’ll build wealth at a steady and robust pace over the long haul.

Dream prices, in contrast, are just that–levels that will only be reached if investor emotions and misuse of leverage and/or stop-losses reach an extreme. They may remain just a pleasant dream, and you’ll likely have to be very patient. But if your buy limit orders are executed, they’ll become an extremely enriching reality.

Conservative Holdings

AltaGas Ltd (TSX: ALA, OTC: ATGFF)–Earnings reported: March Portfolio Update. This stock has now appreciated more than 10 percent beyond my last buy target of USD24. Some of that is due to the Canadian dollar’s surge. But even in home currency terms, AltaGas is fast approaching the all-time highs it held in late October 2006, before the trust tax was announced.

It’s not hard to justify the stock’s move, as the company has continued to grow robustly by adding safe, cash-generating assets. A 20-year deal with NOVA Chemicals announced last month is just the latest example. With the payout ratio less than 50 percent in the fourth quarter, I fully expect to see dividend growth revive at least by 2012. I would sell if we saw two to three quarters of deteriorating margins and with the yield at just 5 percent, but I’m not inclined to raise my buy target now.

During last year’s Flash Crash, the stock sank to the neighborhood of USD16. That’s aggressive for a dream buy price. But even a dip to USD20 would push the yield up to around 7 percent. That’s where I’d set a buy limit order.

Artis REIT (TSX: AX-U, OTC: ARESF)–March Portfolio Update. This one has come back a long way from its lows of late 2008, when investors feared an implosion of the property market in Alberta where virtually all of its assets are. As it turned out, its high-quality portfolio of below-market rents saved it the worst from that market and allowed the company to expand rapidly with acquisitions.

Last month it completed CAD73.2 million in previously announced deals and announced CAD104.3 million new ones. The real estate investment trust has issued primarily equity to do these deals, which has created some short-term dilution and drove up the payout ratio to 93 percent in the fourth quarter. In the REIT world, however, costs usually precede cash flow, so we should start to see dividend growth sometime in the next 12 to 18 months.

I would change my opinion to the negative if the REIT’s occupancy deteriorated significantly, particularly if that were due to a newly completed acquisition. The stock trades slightly above my buy target of USD14. It’s unlikely to get back to the old low of less than USD5. But a buy limit order in the USD10 range would deliver a yield of nearly 11 percent.

Atlantic Power Corp (TSX: ATP, NYSE: AT)–Mar. 29 Flash Alert. I recently raised my buy target for this company to USD15. That’s a level that locks in solid value, as the company continues to add to its portfolio of cash-generating power assets. And I was pleased with answers given by CEO Barry Welsh at the Investing Daily Wealth Summit in Las Vegas last weekend. But dividend growth isn’t likely until the outlook becomes clearer for new contracts at a pair of gas-fired power plants in Florida.

Atlantic went under USD12 during last year’s Flash Crash. No doubt, many investors have grown increasingly fearful as the stock has risen, which is a necessary condition for extreme volatility, though by no means a sure bet for it. USD12 would seem a reasonable dream buy price, which would produce a yield of more than 9 percent.

I would consider selling if there were a significant change in management’s future guidance, particularly regarding dividends.

Bird Construction (TSX: BDT, OTC: BIRDF)–Mar. 10 Flash Alert. The construction company did experience its own “mini crash” on Nov. 9, as an initial negative reaction to the third-quarter earnings release probably flushed out a number of stops. The stock took roughly a month to recover all of its lost ground and more, though it came USD5 off the low by the close on Nov. 9.

I stuck with Bird then because of its superior franchise, which was affirmed again by solid fourth-quarter results and promising 2011 guidance. I certainly would have no qualms about recommending it again on a dip to USD30 or lower, though it’s hard to believe it could pull off the same trick twice.

Set a dream buy price at USD30 but be prepared to buy at my target of USD35, which is excellent value for this dominant company that’s about to accelerate growth in the reviving oil sands region. I would consider selling if its order backlog declined significantly (it rose last quarter) and the dividend payout ratio rose above 90 percent.

Brookfield Renewable Power Fund (TSX: BRC-U, OTC: BRPFF)–Feb. 23 Flash Alert. There are few risks to this power producer trust, whose revenues are locked in by long-term contracts and which has numerous avenues to build more plants and secure even more revenue. That hasn’t stopped the stock from being occasionally volatile, falling as far as USD12 in March 2009.

A dream buy price at the Flash Crash low of USD18 or so is probably about as good as we’ll do anytime soon. But anyone who gets that price will own a very solid company yielding more than 7 percent, and with dividend growth on its plate. My buy target otherwise is still USD22, a level 6 to 7 percent below the current price.

Note this company hasn’t converted to a corporation, so it will still almost certainly be withheld 15 percent tax from US IRA accounts. I’m still looking for conversion next year, but management is likely to provide more guidance next month when it announces first-quarter earnings, around May 13.

I would consider selling if the stock hit USD30 or higher, or if there were at least three consecutive quarters during which management was forced to eat into reserves to cover the dividend.

Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF)–March Portfolio Update. This very safe REIT has also had no shortage of buyers recently and currently trades more than 10 percent above my buy target of USD18.

The REIT added another 495 suites in the Vancouver area of British Columbia last month, further strengthening diversification with another batch of high-quality properties. British Columbia now accounts for 9.5 percent of the total portfolio. On the other hand, the last dividend increase for the REIT was back in 2003, as management has been extremely conservative setting its payout to ensure it’s sustainable in all environments. That makes the units less than attractive above my target.

One positive: The REIT did trade regularly below USD18 as recently as Mar. 15, so a return to that level is certainly possible, and last spring it touched USD14. At that price, the yield pops to nearly 8 percent. That’s a good place for a dream buy price. A drop in occupancy rates below the traditional 98 to 99 percent rate would signal a shift by management to riskier properties, which would make me consider selling.

Cineplex (TSX: CGX, OTC: CPXGF)–Feb. 23 Flash Alert. The owner and operator of increasingly high-tech cinemas in Canada has discovered the secret of growing cash flows even when attendance is down, mainly by focusing on upgrading the experience of customers and maximizing revenue per.

Unfortunately for would-be buyers, however, its success is now public knowledge, and the stock has recently made new all-time highs well above my target of USD23. My advice is still to wait on that price. But the stock has made regular trips to even lower levels in past months, moving under USD20 briefly last summer. At that level the stock would yield only a bit over 6 percent, but barring something really drastic–the stock hasn’t had that kind of trading history–that seems unlikely.

The 2009 low was under USD14, however, so the very patient could look for something there, with the understanding it would only be hit under very extreme conditions. Any indication the company had hit a wall up-selling customers or significant payout ratio deterioration would force me to reassess and possibly sell.

CML Healthcare (TSX: CLC, OTC: CMHIF)–March Portfolio Update. More than any other Conservative Holding, CML has very clear upside catalysts and risks. If it can continue improving margins at the US operations–which remain troubled by a weak economy and industry uncertainty–it will cover its dividend and rebuild its financial strength. If not, we’re heading for another dividend reduction later this year.

I recently returned CML to a buy with a target of USD12. Given its challenges as a business, however, I wouldn’t set a dream buy price much below that. A drop below USD10 would set a new multi-year low and could be the result of new weakness. It could be a buy. But I’d want to keep my buy decision on manual rather than automatic.

Colabor Group (TSX: GCL, OTC: COLFF)–Mar. 10 Flash Alert. An April High Yield of the Month, Colabor shows many signs of returning to growth, not the least of which is a continuing series of successful acquisitions that cut costs, boost sales and improve competitive advantage.

On the other hand, given its high yield of nearly 9 percent a break much below current prices could well signal a relapse at the core business, which survived the 2008-09 credit crunch/recession/market crunch with dividend intact but has seen growth stymied ever since. As a result, I don’t advise setting a dream buy price. Anything under USD13 will produce a powerful return if the company performs half as well as I think it will.

Davis + Henderson Income Corp (TSX: DH, OTC: DHIFF)–Mar. 10 Flash Alert. My biggest fear for this provider of logistics services to Canada’s booming banking industry: Investors are taking the yield shown by various quote services at face value rather than taking into account management’s stated plan to pay out at a quarterly rate of CAD0.30.

The quoted yield is over 9 percent. The actual yield is around 6 percent. Once the company does declare its real dividend–probably in May–we could see some selling. That’s a good reason to set a dream buy price/buy limit order back in the mid-teens, which the stock last saw during the Flash Crash. At that level, the stock would indeed yield well in the upper single digits with the potential for rapid growth ahead.

It’s a value on that basis up to USD20. A significant boost in the payout ratio and/or a drop in sales would be a warning sign for the underlying business.

Extendicare REIT (TSX: EXE-U, OTC: EXETF)–March Portfolio Update. The operator of long-term care facilities in Canada and the US has been pretty much off to the races since I added it to the Conservative Holdings in January. The removal of 2011 taxation fears was one likely catalyst–the company didn’t covert and held its dividend steady.

Another was very strong fourth-quarter and full-year 2010 earnings, which further affirmed the safety of the dividend. Those merited a boost in my buy target to USD12. Unfortunately, that’s still roughly 10 percent below market value. It’s not too hard to see the stock falling back to the USD9 area it held back in December, and that’s probably a good place to set a dream buy price.

My confidence would be shaken if the payout ratio rose toward 100 percent in coming quarters and expected rate increases didn’t materialize.

IBI Group (TSX: IBG, OTC: IBIBF)–Mar. 29 Flash Alert. Up until it converted to a corporation on Jan. 1, investors seemed terminally afraid of this recommendation, which I added in December 2009. Now the stock is nearly 10 percent above my buy target of USD15. And, with fourth-quarter earnings showing a noticeable acceleration of its business fortunes, the stock shows every sign of pushing out to at least a new post-2008 crash high (USD18) and even making a run at the low-to-mid-20s, a level last reached in early 2008.

The company’s once-core energy patch contracts are still well below pre-crash levels, and US operations are still a work in progress. But IBI has successfully expanded globally, making up for the lack of private-sector business with public-sector contracts. What could pull this whole thing down would be an economic relapse in North America. Were that to happen, concerns would emerge about the public sector business and the stock could quickly revisit its 2009 lows of around USD10.

This risk makes the stock a less worthy target for dream buys than, say, a power generator or pipeline company. My buy target remains USD15. The company has proven its ability to weather horrific conditions, however, so more intrepid investors could set a target of USD10.

Innergex Renewable Energy (TSX: INE, OTC: INGXF)–Mar. 29 Flash Alert. As I reported in the Mar. 29 Flash Alert, Innergex has a secure road to growth by adding hydro and wind capacity backed by long-term contracts to Canadian government entities.

In contrast to US municipalities and the federal government, the Ontario Power Authority and others don’t have real budget problems. Nor are the political parties so dysfunctional they would threaten contractual relations, even with an election coming up.

The upshot is we can pretty much count on Innergex, barring some kind of major operational disaster, which would be unprecedented for management.

That makes me very confident staking out a dream buy price well below my target of USD10. Sub-USD6 is one possibility, as that was the price last held before the merger of the parent with the former income trust.

Just Energy Group (TSX: JE, OTC: JSTEF)–Feb. 23 Flash Alert. Just Energy shares currently trade just above my buy target of USD16, a price where they’d yield just about 8 percent. The company has proven its ability to weather extreme ups and downs in the economy, state political turmoil/utility bashing and currency volatility, namely a sinking US dollar. It managed a successful conversion to a corporation on Jan. 1 without cutting dividends. And, as the business continues to grow, management is likely to share the wealth with investors as dividend increases.

That being said, anyone who lived through the US utility implosion of 2001-02 knows energy marketing is a tough business with a lot of moving parts. I look every quarter for signs this company is faltering in managing out its various risks. I haven’t been disappointed yet. But I’m not the only one on the lookout, and the stock has seen massive volatility at times when otherwise insignificant bad numbers have appeared.

One could set a dream buy target in the neighborhood of USD12, which was the Flash Crash bottom and would produce a yield of over 10 percent. But given the business risk, I’d rather keep my decisions on a dream buy price on manual rather than automatic.

Keyera Corp (TSX: KEY, OTC: KEYUF)–Feb. 23 Flash Alert. This company’s success is fully based on acquiring and building new assets to serve fast-growing areas of Canada’s energy patch.

The only thing that could derail its success would be a full-scale reversal of global energy demand. But as it proved in 2008-09, it has the strength to hold its financial strength and dividends even then. As a result, I’m supremely confident setting a dream buy target price significantly below the current level, say in the USD25 to USD30 range. Otherwise, it’s a buy on a dip to USD38.

A series of blunders regarding acquisitions or exposure to revenue streams that are less than secure would make me reconsider owning Keyera at all. But that’s going to take a very long series of errors.

Macquarie Power & Infrastructure (TSX: MPT, OTC: MCQPF)–Mar. 16 Flash Alert. The key with this company is management’s ability to meet its dividend coverage guidance over the next several years. This is currently estimated at around 100 percent for 2011, followed by lower numbers in subsequent years. The primary uncertainty is what it will be able to sell output from the Cardinal Power plant for when current contracts expire. That should become clear sometime over the next 18 to 24 months.

Management has appeared to set conservative targets both for the next few years and for Cardinal. That’s a good reason to be confident about the current level of dividend, though growth will probably not resume until after a new Cardinal agreement is reached.

The stock has traded less than USD7 over the past 12 months several times and was less than USD6 last spring. That’s a good dream buy price. Meanwhile, it continues to trade below my buy target of USD9.

Northern Property REIT (TSX: NPR-U, OTC: NPRUF)–Mar. 10 Flash Alert. This real estate investment trust’s extraordinary diversification geographically and focus on strong customers–including provincial governments–make cash flows and therefore dividends pretty much recession-proof. And management has used the improved market to further bullet-proof against future fiascos.

Investors have noticed and the units have blasted off to new all-time highs, well past the heights achieved in early 2007. At the current level of over USD30 the yield is still 5 percent-plus, very safe and likely to keep growing–faster than the 3.6 percent annual rate of the past five years. I’ve raised my buy target to USD28.

More interesting, however, is the possibility Northern Property’s stock market success has induced investors to set stops that could turn a mild disappointment into a selling wave and produce another prime buying opportunity. That’s a bit of a long shot at this point, but the rewards of buying at USD20, for example, are worth the likelihood such a buy limit order would never be exercised.

Pembina Pipeline (TSX: PPL, OTC: PBNPF)–Mar. 10 Flash Alert. Like Northern Property and RioCan REIT (see below), Pembina has become a favorite of investors as its price has risen. Like them, its revenue streams are secure, with a good portion locked in simply by capacity contracts that pay no matter what happens to energy flow or prices.

There’s always the possibility of a problem with the company’s construction projects, particularly on the cost side. Thus far, however, management has navigated the risks well, and every new project has boosted cash flow on schedule. Moreover, given the lack of infrastructure in the oil sands, natural gas liquids and shale regions of Canada, there’s no shortage of future projects.

On the other hand, Pembina’s climb to new highs has made its stock progressively more volatile. At this point the most likely catalyst for a decline is some macro event that triggers some selling and sets off the stops that are likely somewhere in the USD20 to USD22 area. That could push down the stock temporarily into the teens. Dreamers may want to set buy limit orders in the USD14 area, which was hit in early 2009.

That would be a superb place to capture this stock, though the opportunity would almost certainly not last long. More likely we’ll see a dip to my buy target of USD22, which itself would be great place to capture this very solid company. When Pembina starts to build speculatively–i.e. without signing on business first–I will take a step back. That’s not happening yet.

RioCan REIT (TSX: REI-U, OTC: RIOCF)–March Portfolio Update. This king of Canadian real estate investment trusts is starting to see cash flow growth accelerate, the result of several years of buying strong properties in the US and Canada from distressed owners.

The payout ratio of nearly 100 percent is an inhibitor to dividend growth, at least in the near term. That’s discouraged me from raising my buy target much past the current USD25. A dip to the mid-teens, however, wouldn’t be unthinkable if the market became rattled and the stock has now matched its late 2007 all-time high once again. A return to USD10–where the unit price hit in March 2009–would seem extremely unlikely, even for a single trade. But anything under USD20 would seem in the realm of possibility and would produce staggering returns over the long haul.

A management miscalculation on an acquisition that changed guidance would be worrisome. At this point, however, a lot of things will have to go wrong in succession to shake me out of Canada’s most powerful REIT.

TransForce (TSX: TFI, OTC: TFIFF)–March Portfolio Update. This stock has come back from the dead the past couple years for one major reason: Management has stuck to its strategy of consolidating Canada’s fragmented transport and logistics industry, steadily acquiring rivals to boost sales and scale. Now that scale has been achieved and business conditions improved, the hard work is showing up as earnings growth.

The stock is still below the all-time high reached in February 2006, when it was arguably a much less valuable company, though a higher-yielding one. That implies more upside despite the more than four-fold gain from early 2009 lows.

Given what the company has proven itself able to weather, only a reversal of business strategy would cause me to abandon this stock, and that doesn’t look likely with the Dynamax deal now completed. We could certainly see a move to the neighborhood of USD10, as was hit during last year’s Flash Crash. I continue to rate the stock a buy up to USD14. But executing a buy limit order at USD10 on a short-lived dip would be quite a coup.

Aggressive Holdings

By their very nature, Aggressive Holdings should trade with more volatility than Conservative Holdings. We like them precisely because earnings do move with commodity prices and/or are sensitive to the level of economic growth.

That basically means two things when it comes to setting dream buy targets. One, it should be easier to hit targets that are set at very low levels. Two, prices can go a lot lower than you think if the market really starts reacting to these macro factors.

That, in effect, is what happened in the fall of 2008. As I saw it at the time, the world could certainly support USD80 per barrel oil and I swung bullish when that point was hit. As it turned out, the world certainly could manage that price, as evidenced by oil’s return to triple digits last month. On the other hand, it had sunk under USD30 a barrel by late 2008, taking the prices of most producers down a lot further than I had imagined.

The lesson here is that stocks that are more sensitive to major events trade with a different dynamic than those that are less sensitive. And their earnings and therefore dividends are more volatile as well.

Acadian Timber Corp (TSX: ADN, OTC: ACAZF)–Earnings reported: March High Yield of the Month. This newest addition to the Aggressive Holdings got out of the gate fast last month, before giving back some of those gains over the past week. Ironically, there’s been little or no news on the company level over that time. The only development is a couple of analysts who have cut their ratings apparently due to the stock’s upward push.

The key to the stock’s valuation at this point is the dividend level. Management has weathered the worst of a three-year bear market in forest products and is now confident last month’s 312.4 percent dividend boost will hold, with increases in subsequent years. As long as that’s the case, there will be a floor under the stock, but we could certainly see more wild short-term action.

My advice for those who didn’t get in on my initial recommendation is just to wait for a dip to USD11 or lower to pick up shares. As a dream buy price, a level of less USD6 could be reached if the world were perceived to be heading back into a recession. That would bring a yield of nearly 14 percent, though slowing growth would no doubt bring on more risk.

Ag Growth International (TSX: AFN, OTC: AGGZF)–Mar. 16 Flash Alert. As I highlight in April’s High Yield of the Month, Ag Growth continues to reap the benefit of robust conditions in global agricultural markets. These are likely to remain tight in the year ahead, as the Japanese natural disasters boost that country’s need for imports.

The Canadian dollar/US dollar exchange rate, weather in North America and its impact on harvests and the price of steel all have the potential to impact Ag’s margins in the near term. All three triggered a selloff in the wake of the fourth-quarter earnings announcement, despite overall robust numbers.

The stock’s current price looks cheap, relative to yield and dividend growth. But it also traded at barely USD40 not six months ago. I’m rating it a buy up to USD50. But a trip to 40 or even 35 and back looks possible on a particularly bad day.

ARC Resources (TSX: ARX, OTC: AETUF)–Feb. 23 Flash Alert. This oil and gas producer has had a big run the past year but has now backed off the high it hit in late February, after announcing robust fourth-quarter and full-year 2010 earnings. That may have something to do with concerns about natural gas prices, and possibly a brokerage downgrade on valuation concerns, as there was no real news at the company. The volatility this year does demonstrate the kind of volatility one should expect from oil and gas producers.

ARC is successfully boosting production at its shale reserves, driving down costs and pushing up profit despite weak natural gas prices. And it should do it again in 2011. But its price is going to follow energy prices. That’s one reason not to chase it above my target of USD26. It’s also good cause to set a dream buy target of USD20 or lower–the stock went to roughly USD10 at the early 2009 bottom. Again, it’s all about energy prices.

Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF)–March Portfolio Update. If this company proved anything over the past two years, it’s that the dividend rate of CAD0.10 per month is sustainable come what may. Adversity has included everything from the historic market crash to the shuttering of the Beaumont, Texas, plant and interrupted supply due to a strike at Brazilian giant Vale (NYSE: VALE). That hasn’t kept this bulk chemicals company’s stock from being exceedingly volatile, however.

The current yield is close to 9 percent and my buy target is USD15, a bit above current levels. But it’s not hard to imagine a return trip to USD12 or even USD10, even without a significant threat to the dividend. The March 2009 low was less than USD4, though revisiting that would require extreme conditions.

Daylight Energy (TSX: DAY, OTC: DAYYF)–March Feature Article. The company is still known as primarily a natural gas producer, though liquids are 42 percent of overall output and rising. It has, however, started to impress investors with its ability to boost cash flow by growing output, thereby increasing scale and cutting costs. It now trades a bit above conservative estimates of the net asset value (NAV) of its reserves (roughly USD11 per share).

In addition to the yield of a little more than 5 percent, NAV is probably what will drive the stock price in coming months. That should build a rising floor under the price, as oil and gas edge higher. In the near term, however, volatility is part of the game, with the stock dropping 15 percent from early to mid-March before soaring 20 percent to current levels.

My target for long-term investors is USD11 (NAV of reserves in the ground). Buy limit order users, however, are well within the bonds of reason to set a dream price of USD8 or perhaps even lower. That would push the yield to 7.5 percent and more important leave the stock selling at just 73 cents per dollar of reserves.

The risk of any producer is falling energy prices. This one has proven it can survive almost anything. But another big drop for energy will take it down as well.

EnerCare (TSX: ECI, CSUWF)–March Portfolio Update. The most bullish news for the former Consumers’ Waterheater Income Fund last month was that sub-metering sales hit a record in the first quarter of 2011.

The company was able to take advantage of scale as well as clear regulations for the business in Ontario to add 9,000-plus individual suites, a six-fold boost in orders over 2010 levels. It now has 100,000 contracted suites and is in the process of boosting its sale force by 40 percent to further boost them.

That’s very good news indeed for the safety of the dividend and its prospects for future growth, and by extension a solid underpinning for the share price.

The yield is still over 9 percent, and the stock sells under my target of USD8. There’s the risk that the company could have trouble refinancing the large amount of debt coming due in 2013 and 2014, which was run up largely to afford sub-metering expansion. Although regulatory concerns appear resolved, they could still resurface before EnerCare has a chance to restore its financial strength.

For those reasons, I’m not advising setting a dream buy limit order on the stock. It may get cheaper even as the company stays strong. But let’s keep the decision a manual one rather than automatic.

Enerplus Resources (TSX: ERF, NYSE: ERF)–March Feature Article. At one time in mid-2006 Enerplus traded at nearly USD60. Today, after more than doubling off its March 2009 low, the stock is barely half that. It’s also volatile as ever, with two-day plunges of 10 to 20 percent occurring several times the past six months.

The good news about the company is that it still boasts a yield of more than 7 percent, with the dividend untouched by its Jan. 1 conversion to a corporation. It’s also successfully developing what promise to be long-lived and profitable light oil reserves in the Bakken region and natural gas shale in the Marcellus trend. That’s been a hallmark of the company for decades and it should keep production growing 10 to 15 percent annually the next several years, which will support capital spending, dividends and debt reduction.

That underlying strength means selloffs are generally buying opportunities. A return trip to the mid-20s, for example, would present investors an opportunity to buy below net asset value and reap a yield of 8 to 10 percent. Those who bought on a one-day dip to less than USD28 on Mar. 15, for example, are already up 15 percent not counting dividends.

Newalta Corp (TSX: NAL, OTC: NWLTF)–March Portfolio Update. As with TransForce, I’ve stuck with Newalta throughout its ups and downs because management has maintained its growth plan despite volatile industry conditions. That’s my motive for staying in now, despite the fact that it no longer boasts a high yield.

Fortunes continue to follow both commodity prices and the industrial economy in Canada. The former are a major source of strength, while the latter have been muted by the strength in the currency. Any hint of a retreat to recession will trigger a selloff in Newalta. This, however, isn’t the sort of stock that’s attracted a lot of stop-losses, and volatility has been light since a late December rally. My buy target remains USD13. A dream buy price should probably be set around USD9.

Parkland Fuel Corp (TSX: PKI, OTC: PKIUF)–Mar. 16 Flash Alert. With a yield of more than 8 percent, a payout ratio of just 58 percent based on fourth-quarter cash flows and a strategy that’s bearing fruit, Parkland in my view is already at a dream buy price and would be up to my target of USD13.

I look for further improvement on the rising margins and volumes of the fourth quarter–and eventually a return to dividend growth–to take this stock higher going forward. The worst risk is a renewed slowdown in Canada, which would hurt refiner margins and sales volumes. But the stock isn’t priced for perfection by any stretch at just 22 percent of annual sales.

A likely low for another pullback would be around USD10, which would drive the yield up to 10 percent. But I’m happy recommending the stock as a buy at current prices.

Penn West Petroleum (TSX: PWT, NYSE: PWE)–Feb. 23 Flash Alert. Before the company announced what its post-corporate conversion dividend would be, its stock languished around USD20 and lower, as investors speculated on whether the rumor of a massive dividend cut ahead would prove true.

That’s exactly what happened, as management trimmed the payout by 40 percent even before converting, while shifting to a quarterly schedule. The market, however, responded by refocusing on the company’s immense reserve value, rather than yield. And the result has been a strong run for the stock to the upper 20s, a level not seen since mid-2008. In my view, there’s plenty to come.

For one thing, the company trades roughly 15 percent below conservative valuations of its reserves. For another, we still don’t know the extent of those reserves, as the company works with Chinese investors to develop oil sands and the Japanese in shale gas.

With the trust conversion confusion behind it there’s no reason to expect Penn West to return to the teens, other than on a steep drop in oil prices. Those who want to bet on that–as well as future development of the company–can set a dream buy price of USD18 or so. Otherwise, Penn West looks much better as a purely bullish bet and buy up to USD30.

Perpetual Energy (TSX: PMT, OTC: PMGYF)–Mar. 10 Flash Alert. It’s hard to imagine Perpetual sinking much lower, other than if it’s forced to file for Chapter 11. That can’t be ruled out given the weakness in natural gas prices and the company’s continued leverage to them. But there’s little to be gained buying this company at USD2 or USD3 under those circumstances.

Meanwhile, fourth-quarter earnings were promising, with the company lifting liquids production to 7 percent of output, cutting costs per barrel of oil equivalent by 13 percent and successfully hedging enough sales at good prices to cut debt and produce a payout ratio of just 23 percent. That makes it more likely the dividend of nearly 9 percent will hold, in which case the stock is more likely to rise than fall.

This stock is for very aggressive investors only, but it’s again a buy up to USD5.

Peyto Exploration & Development (TSX: PEY, OTC: PEYUF)–Mar. 10 Flash Alert. For those who want an ultra conservative, high-quality play on natural gas, Peyto is the place to be.

Shrugging off low gas prices, the company has consistently boosted reserves and output. Despite surging to its highest level since mid-2006 the stock still trades for just 60 cents per dollar of conservatively valued reserves. All that argues for further gains, though the post-conversion dividend yield is just 3.6 percent.

The stock traded around USD14 a year ago, which would be a nice price to pick up shares. Like all producers, this one is going to follow energy prices, so you’ll be better off keeping decisions on dream buys to a manual basis.

PHX Energy Services (TSX: PHX, OTC: PHXHF)–Mar. 10 Flash Alert. This energy services company has had a wild trading year already, surging over USD16 in mid-February, only to plunge to USD12 a few weeks later. The selloff accelerated in early March following the release of fourth-quarter earnings showing rising costs due to demand temporarily outstripping the company’s ability to meet it, driving up costs. That triggered a reduction in ratings from five brokers following the stock, leaving the bull/bear count at three “buys” and eight “holds.”

Unfortunately, I pushed up my buy target to USD14 along the way. But now at a little over USD12 and yielding 4 percent-plus–and well positioned in a strong market–PHX looks like a solid value again. Barring some real weakness either with the company or in North American shale drilling, it’s unlikely we’ll see a meaningful drop in the stock from here. And if we do, we’ll want any buy decisions to be made then, rather than automatically now.

Provident Energy (TSX: PVE, NYSE: PVX)–Mar. 10 Flash Alert. This company is much closer to being a Conservative Holding now, after converting wholly to a midstream company by spinning off its production operation.

Fourth-quarter earnings were solid as margins rose and adjusted funds from operations surged 40 percent. The payout ratio dipped to 68 percent, affirming the safety of the 4.5 cents Canadian per month post-conversion dividend. The stock has been volatile in recent months, probably because investors are just getting used to the company’s business mix. And given its continued exposure to natural gas liquids spreads, it’s still possible we could see some ups and downs, particularly when earnings are announced probably in early May.

The stock is a value up to USD9. But those who want to get a little greedier can set a dream buy level at USD7.50 or lower.

Vermilion Energy (TSX: VET, OTC: VEMTF)–March Feature Article. This stock has broken through a succession of rising buy targets over the past year. With management not likely to boost the distribution until the Corrib platform is up and running, I’m going to keep my buy target at USD50, which is slightly below the current price.

I suspect the stock is high now because of pressure on the liquefied natural gas market due to Japan’s suddenly critical energy import situation (Vermilion produces in Australia and Europe) as well as rising oil prices in the wake of the Middle East turmoil. Both are upside catalysts that could subside in coming months, yielding a better buying opportunity for Vermilion, which otherwise has been spared most severe volatility since touching bottom at less than USD18 in February 2009.

One could set a buy limit order at USD35, the level where the stock traded before beginning an almost relentless upward march six months ago. Given Vermilion’s holding of its dividend throughout the 2008-09 credit crunch/market crash/recession, I’m confident it would hold up through another energy market contortion.

More than any other energy producer, I’m comfortable putting an automatic buy limit order at a very low price and sitting back to see how crazy this market get.

Yellow Media (TSX: YLO, OTC: YLWPF)–Feb. 23 Flash Alert. There’s no point putting a buy limit order at a point significantly below Yellow’s current share price. That’s because the current value of barely USD5 is basically a line in the sand. There will only be a real breakdown below that point if the company has failed in its efforts to generate enough cash flow to hold the current dividend. In fact, with the yield at 12.5 percent, it’s likely already pricing in a sizeable dividend cut, despite management’s assertions that the current rate will hold.

Fourth quarter earnings and the trends within were on track enough with long-term management guidance to assure the payout will hold at least through 2011. Meanwhile, the sale of roughly half the Trader operation for about CAD750 million will cut debt approximately CAD500 million and refocus operations on the more stable print and Internet directory business.

On the negative side, it raises the stakes for converting traditional print directory advertisers to the company’s web-based offerings, far from a sure thing. But it keeps Yellow a solid bet to succeed. And with one “buy” and 10 “holds” among the 11 analysts covering the stock on Bay Street, success would bring a decided upward boost in the stock.

That being said, no one who owns Yellow now should buy more. And a significant setback at this point would be a reason to sell, not buy. This is your dream price if you’re an aggressive investor.

Mutual Fund Alternatives

I don’t advise setting dream buy prices for funds. Rather, if you want exposure just buy them as you would ordinary stocks. Your return will depend on the market, and, to a lesser extent, management savvy. Note that only Canadian investors can participate in these funds’ warrant offerings. But these are a low-cost way for funds to raise capital and should be accretive for all shareholders, provided management makes good decisions on what to do with the funds.

Blue Ribbon Income Fund (TSX: RBN-U, OTC: BLUBF)–This closed-end fund holds a widely diversified basket of high-yielding Canadian securities. It trimmed the distribution to 5.5 cents Canadian per month starting in February. The new rate is about 6 percent, and the fund sells at a slight discount to net asset value.

You should do better buying individual stocks, but this fund does have a very solid long-term record, with only one down year in the past 10. Buy on dips to USD11.

EnerVest Diversified Income Trust (TSX: EIT-U, OTC: ENDTF)–This closed-end fund trades at a sizeable discount to net asset value (12 percent-plus), largely because it does use some leverage. Other than that, it holds a conservative mix of high-yielding Canadian equities. It’s had one more down year in the past 10 (two) than Blue Ribbon, but also more dramatic up years, so performance is roughly equal over the long haul. Buy up to USD16.

Precious Minerals & Mining Trust (TSX: MMP-U, OTC: PMMTF)–This closed-end fund differs from the other two on my list in three major ways.

First, it trades at a premium to net asset value, as of now nearly 13 percent. You’re getting a dollar’s worth of assets for nearly USD1.13. Second, many if not most of its holdings pay no dividend at all. Rather, the dividend is basically funded off portfolio appreciation—net asset value was up 37.8 percent in 2010. Third, it’s in no way, shape or form diversified. If metals prices run out of gas–especially gold–so will the fund’s price and dividend.

The upshot: This is a play on metals, pure and simple. It’s not suitable for income investors seeking safety, other than as a possible hedge for other positions. If you want to play gold, this is how you get some income while you bet on higher prices. Buy up to USD12 if you fit that description. If not, steer clear.

Earnings: Another Round

It took until the last day of the first quarter 2011 for the How They Rate universe to wind up fourth-quarter and full-year 2010 earnings season. Happily, we won’t have to wait nearly as long to get the numbers back for first-quarter 2011.

Per usual this time of the quarter, most Canadian Edge Portfolio companies haven’t yet released definite announce dates. Here’s what we know so far, along with estimated dates for the vast majority.

Conservative Holdings

• AltaGas Ltd (TSX: ALA, OTC: ATGFF)–Apr. 29 (estimate)
• Artis REIT (TSX: AX-U, OTC: ARESF)–May 12 (estimate)
• Atlantic Power Corp (TSX: ATP, NYSE: AT)–May 13 (estimate)
• Bird Construction Inc (TSX: BDT, OTC: BIRDF)–May 10 (estimate)
• Brookfield Renewable Power Fund (TSX: BRC-U, OTC: BRPFF)–May 13 (estimate)
• Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF)–May 11 (estimate)
• Cineplex Inc (TSX: CGX, OTC: CPXGF)–May 13 (estimate)
• CML Healthcare Inc (TSX: CLC, OTC: CMHIF)–May 5 (estimate)
• Colabor Group (TSX: GCL, OTC: COLFF)–Apr. 28 (estimate)
• Davis + Henderson Income Corp (TSX: DH, OTC: DHIFF)–May 4 (estimate)
• Extendicare REIT (TSX: EXE-U, OTC: EXETF)–May 6 (estimate)
• IBI Group Inc (TSX: IBG, OTC: IBIBF)–May 6 (estimate)
• Innergex Renewable Energy (TSX: INE, OTC: INGXF)–May 10 (estimate)
• Just Energy Group Inc (TSX: JE, OTC: JSTEF)–May 20 (estimate)
• Keyera Corp (TSX: KEY, OTC: KEYUF)–May 10 (confirmed)
• Macquarie Power & Infrastructure Corp (TSX: MPT, OTC: MCQPF)–May 11 (estimate)
• Northern Property REIT (TSX: NPR-U, OTC: NPRUF)–May 11 (estimate)
• Pembina Pipeline Corp (TSX: PPL, OTC: PBNPF)–May 6 (estimate)
• RioCan REIT (TSX: REI-U, OTC: RIOCF)–Apr. 29 (estimate)
• TransForce (TSX: TFI, OTC: TFIFF)–May 17 (confirmed)

Aggressive Holdings

• Acadian Timber Corp (TSX: ADN, OTC: ACAZF)–May 2 (confirmed)
• Ag Growth International (TSX: AFN, OTC: AGGZF)–May 13 (estimate)
• ARC Resources Ltd (TSX: ARX, OTC: AETUF)–May 5 (estimate)
• Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF)–May 10 (estimate)
• Daylight Energy Ltd (TSX: DAY, OTC: DAYYF)–May 6 (estimate)
• EnerCare Inc (TSX: ECI, OTC: CSUWF)–Apr. 29 (estimate)
• Enerplus Corp (TSX: ERF, NYSE: ERF)–May 13 (confirmed)
• Newalta Corp (TSX: NAL, OTC: NWLTF)–May 10 (estimate)
• Parkland Fuel Corp (TSX: PKI, OTC: PKIUF)–May 16 (estimate)
• Penn West Petroleum Ltd (TSX: PWT, NYSE: PWE)–May 5 (confirmed)
• Perpetual Energy (TSX: PMT, OTC: PMGYF)–May 10 (estimate)
• Peyto Exploration & Development Corp (TSX: PEY, OTC: PEYUF)–May 12 (estimate)
• PHX Energy Services Corp (TSX: PHX, OTC: PHXHF)–May 6 (estimate)
• Provident Energy Ltd (TSX: PVE, NYSE: PVX)–May 5 (estimate)
• Vermillion Energy Inc (TSX: VET, OTC: VEMTF)–May 6 (estimate)
• Yellow Media Inc (TSX: YLO, OTC: YLWPF)–May 5 (tentative)

As always, I’ll be using the numbers and guidance management provides in the earnings releases and conference calls to assess the health of each underlying company. Those that continue to measure up–as all of these have to date–will remain Portfolio Holdings. Those that exceed my expectations enough may earn higher buy targets.

On the other hand, those that don’t measure up will be unceremoniously unloaded. I’ll replace them with better companies when opportunity knocks. That’s how we’ll continue to weather the inevitable downturns while building wealth and reaping generous dividends, come what may in 2011 and beyond.