Thus far in 2011, one Canadian Edge Portfolio Holding has returned more than 40 percent. Another nine stocks are up at least 20 percent, and 20 overall are in positive territory.

Meanwhile, four current Holdings are down at least 20 percent on the year, and a total of 18 are in negative territory. Of the two positions closed this year, one was slightly ahead from beginning of year to sale and the other dropped a horrific 80 percent.

Where you personally stand with Canadian Edge Portfolio stocks depends on which of them you owned. Anyone who rode down Yellow Media Inc (TSX: YLO, OTC: YLWPF) with me will have some significant red ink, though hopefully limited by not averaging down and investing in better performing picks. Similarly, most of our energy producers have taken a hit in the past month or two because of the retreat in oil and gas prices.

On the other hand, the power producer and pipeline companies highlighted in this month’s Feature Article have had another great year so far, despite the volatility of the past several weeks. My four real estate investment trusts (REIT) have also performed well.

Clearly, investors have been more comfortable with some sectors than others this year. And these preferences have shown up most acutely in share prices when the market has hit emotional extremes, as it did in August.

But sector selection only explains so much of the variation in performance. Peyto Exploration & Development Corp (TSX: PEY, OTC: PEYUF), for example, has returned more than 20 percent this year, despite the fact that natural gas–89 percent of its output–has been extremely weakly priced all year, and if anything has softened more than oil recently.

Cineplex Inc’s (TSX: CGX, OTC: CPXGF) ability to grow its dividend this year–a 2.4 percent boost announced in May–is without doubt a sign of strength. But the stock’s biggest move this year actually came in August, after it announced solid but not great earnings and amid signs of economic weakness that should logically keep putting pressure on theater attendance.

The drop in Extendicare REIT (TSX: EXE-U, OTC: EXETF) this summer is certainly understandable, as it followed the announcement of a steep cut in Medicare funding that will pressure margins the rest of the year. Similarly, it’s not too surprising that investors would sell off Ag Growth International (TSX: AFN, OTC: AGGZF) in August despite strong second-quarter numbers, on fears a global recession would impact sales and slow its still torrid growth.

Less understandable is the volatility in Davis + Henderson Income Corp (TSX: DH, OTC: DHIFF), which has returned to dividend growth after posting strong second-quarter numbers and whose main customers (major Canadian banks) are in the pink of health.

Keyera Corp (TSX: KEY, OTC: KEYUF) shares, meanwhile, continue to defy gravity, blasting off to a new all-time high in the past week on basically no hard news.

Including Davis + Henderson and Keyera, seven Canadian Edge Portfolio companies have raised dividends at least once in 2011. The share-price performance of the group, however, is anything but uniform, ranging from a 42 percent gain to a 9.5 percent loss. And of the three companies most likely to raise their payouts by the end of the year–Ag Growth, Atlantic Power Corp (TSX: ATP, NYSE: AT) and Northern Property REIT (TSX: NPR-U, OTC: NPRUF)–the year-to-date returns range from plus 7.2 to minus 17.1 percent.

Where there’s been genuine weakening of the underlying business, as was the case with Yellow (see Dividend Watch List), stocks have tanked. But other than that, there’s literally an exception to every “rule” of what’s governing share price performance this year.

In the near term, the stock market is a popularity contest. Literally anything can sway enough sentiment to generate buying and push prices higher. Conversely, almost anything can sour sentiment and push prices lower in the short run.

It’s pretty hard to ignore the short run in a market like this one, when every day seems to bring the potential for ruin. Unfortunately, that’s precisely what makes the most sense when it comes to wealth building. And even in a market that can move as far and fast as this one in either direction, that remains our primary objective.

The key to that is ensuring the companies we own are the strongest they can be as businesses. I laid an egg with Yellow Media, a stock I should have sold the first time the company cut its dividend. Fortunately, second-quarter earnings results confirmed the strength of the other Canadian Edge Holdings. And I’ve since had the opportunity to add a couple more first-rate positions.

Last month it was Student Transportation Inc (TSX: STB, NSDQ: STB). Since then, the stock is up a little less than 20 percent and has begun trading on the Nasdaq under the symbol STB.

The transportation services company also announced the completion of three acquisitions and was awarded 10 new contracts that will generate USD20 million of additional revenue during the 2011-12 school year.

The share price moved temporarily above my initial buy target of USD7; I’m keeping it there for the time being. Student Transportation is a buy under USD7.

This month I’m adding Crescent Point Energy Corp (TSX: CPG, OTC: CSCTF), with a buy target of up to USD48. The oil producer has a strong production growth profile, with its focus on Canada’s side of the Bakken trend. The share price has come off along with oil prices. It’s likely to be volatile going forward, but will be quick to rise when oil rebounds, as I believe it will.

Below I briefly review the rest of the Canadian Edge Portfolio, starting with the Conservative Holdings. I also list where to find my review of second-quarter earnings. Note Artis REIT (TSX: AX-U, OTC: ARESF) is a High Yield of the Month. I’ve moved EnerCare Inc (TSX: ECI, OTC: CSUWF) to the Conservative Holdings from the Aggressive Holdings for reasons explained below.

Conservative Holdings

AltaGas Ltd’s (TSX: ALA, OTC: ATGFF)–Jul. 29 Flash Alert. The stock has traded a dollar or two above my buy target of USD26 since early August. I’m not going to raise until there is a dividend boost, though encouragingly management has indicated it will restore modest growth in the near future–and robust growth once the Forrest Kerr project comes on line in 2014.

Other than that, there’s not much operating risk here, and finances are strong, with CAD100 million in debt maturing in January 2012 an opportunity to refinance at a lower rate. Buy AltaGas on dips to USD26 if you haven’t yet.

Atlantic Power Corp (TSX: ATP, NYSE: AT)–Aug. 12 Flash Alert. The second-quarter numbers were right in line with what management had projected. The key issue, however, is completing the purchase of Capital Power LP, which will double the size of the company while adding considerable financial and operating strength. Atlantic is currently waiting on regulatory approval to put the matter to a shareholder vote, which should clear the Securities and Exchange Commission by the end of October at the latest.

In the meantime, however, it’s locked in a financing agreement that provides some protection should credit markets freeze up, as in 2008. And it’s now hedged against exchange rate swings that could upset the economic value of the transaction. That dramatically increases the odds this deal will be everything management hoped, triggering a promised 5 percent dividend increase by the end of 2011.

Atlantic Power is now trading well below my buy target of USD16. Now is a good time to pick up shares if you’re light.

Bird Construction Inc (TSX: BDT, OTC: BIRDF)–Aug. 12 Flash Alert. Bird’s second-quarter earnings didn’t come close to covering its dividend. Revenues and margins were weak, as sales comparisons were tough and the company relied on lower margin contracts during the period.

On the other hand, order backlog hit a record, and the company completed the CAD78 million purchase of O’Connell, expanding its range of business and very likely ensuring another dividend increase in early 2012. The deal is both an affirmation of Bird’s financial and operating strength and an earnings booster in what’s still a tough but improving market for engineering and construction companies. Bird Construction is still a buy up to USD12 for those who don’t already own it.

Brookfield Renewable Power Fund (TSX: BRC-U, OTC: BRPFF)–August 2011 CE Portfolio Update. Management still hasn’t said when they’ll convert the income trust to a corporation. In any case, as far as the underlying business goes staying a trust appears to be advantageous. Much improved water conditions took the payout ratio down to 70 percent and July and August were both good generating months as well. But the key to higher cash flows and higher dividends for Brookfield Renewable is completing a series of capital projects to increase wind and water power production.

During the company’s second-quarter conference call CEO Richard Legault affirmed “significant progress” all of them, particularly the Comber Wind Project that will be three times the size of its Gosfield facility when completed. Ditto the 45 megawatt Kokish River project in British Columbia, which will sell energy to British Columbia Hydro under a 40-year contract. There’s also the possibility of further drop downs from another unit of parent Brookfield Asset Management (TSX: BAM/A, NYSE: BAM).

The company has to roll over a CAD300 million loan, CAD280 million of which is currently drawn, by Nov. 30, 2012. But with its low-risk operations, it’s had no problems raising capital to finance growth or refinance existing obligations. I’m raising my buy target on Brookfield Renewable Power to USD23.

Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF)–Aug. 10 Flash Alert, Aug. 12 Flash Alert. This apartment REIT had another sterling quarter of high occupancy rates and low-risk expansion, even as it continued to refinance its mortgage debt at low interest rates. The risks are low here, too.

The second quarter is always seasonally strong, since heating costs are much lower. This year’s payout ratio came in at just 70 percent, the best in some time. But we’re not likely to see the REIT’s first distribution increase since October 2003 unless that number can come down to that level for the full year. And until there is a payout increase, there’s no point in paying more than my target buy-in price of USD20 for this REIT. We did see that level reached in early August, as well as several times this spring. Be patient if you haven’t bought yet. Canadian Apartment Properties is a buy under USD20.

Capstone Infrastructure Corp (TSX: CSE, OTC: MCQPF)–Aug. 15 Flash Alert. The owner of power assets moved sharply lower in early August and has yet to recover. The catalyst for the decline was very likely a combination of speculation that second-quarter earnings would disappoint and the general stock market weakness. But whatever the cause, the decline was mostly erased by the time Capstone, formerly Macquarie Power & Infrastructure, finally announced what were uneventful earnings on Aug. 15.

As expected, the results featured several one-time items, including first-time cash flows from the investment in Scandinavian district heating, a CAD18.6 million charge related to the “internalization” of management and startup costs for the now operational Amherstburg Solar Park. These items pushed the second-quarter payout ratio up to 204 percent. But management stuck to its prior guidance of a 2011 payout ratio of 120 percent, with a full-year 2012 payout ratio of 85 to 90 percent of cash flow.

The key issue with the company going forward is the success of ongoing confidential negotiations with the Ontario Power Authority for re-contracting the Cardinal power plant. Signs are hopeful, but until there is an agreement, the issue will negatively overhang Capstone shares.

Management has repeatedly given guidance that the company can maintain its dividend through 2014 in a worst-case, which is presumably Cardinal receiving an unsatisfactory deal and management failing to find new projects.

That’s pretty good assurance the dividend will keep being paid and it points to dividend growth, though probably not for at lest a year or two. Capstone Infrastructure remains a buy for high income up to USD9.

Cineplex Inc (TSX: CGX, OTC: CPXGF)–Aug. 12 Flash Alert. The only problem with this stock is price, which remains above my target of USD25. My advice is to continue being patient if you’ve been unable to take a position, but to stick with it if you’re already in.

The dividend increase this year affirms the company’s operating and financial strength, as well as its ability to transcend what are seasons when movie fare is weak. A buyback of up to 9.7 percent of the company’s outstanding shares should be another plus, as is the dip in the second quarter payout ratio to just 64 percent. Cineplex is a buy under USD25.

Colabor Group Inc (TSX: GCL, OTC: COLFF)–Jul. 29 Flash Alert. Yield has always been the primary appeal of this company. But there’s also real potential for growth, as management continues to aggregate assets in the fiercely competitive but widely dispersed food and related products distribution business.

Colabor has seemed to alternate good and bad quarters over the past year. But third-quarter numbers due out Oct. 6 are likely to show continued improvement on the second quarter, as the company realizes benefits from acquisitions completed earlier this year. There are also indications the restaurant business picked up over the summer in eastern Canada, which should improve market conditions.

The distribution was adequately covered by cash flow even earlier this year, and should continue to be the rest of the year. What should snap Colabor shares out of their current funk, however, will be a solid quarter for revenue growth excluding acquisitions. That may not come this time around. But as long as this company is expanding, it’s laying the foundations for building wealth. Colabor is still a buy up to USD10 for those who don’t already own it.

Davis + Henderson Income Corp (TSX: DH, OTC: DHIFF)–Aug. 10 Flash Alert. On Aug. 9 Davis + Henderson increased its dividend for the first time since converting to a corporation in early January. The rate of growth was modest at 3.3 percent but is a sure sign of more to come.

Meanwhile, the company’s 9.9 percent boost in second-quarter cash flow is another good sign that it is maintaining its strong market position in the digital and print forms business serving Canada’s major banks.

These, in turn, demonstrated their great health last month by universally posting strong fiscal third-quarter earnings, spearheaded by solid growth in their lending business to Canadian consumers and businesses.

The more transactions, the greater the demand for Davis & Henderson products, even as management continues to scout around for more targets to boost its reach and cash flows.

Davis + Henderson is a buy up to USD20 for conservative investors who don’t already own it.

EnerCare Inc (TSX: ECI, OTC: CSUWF)–Aug. 8 Flash Alert. To date I’ve recommended the former Consumers’ Waterheater as an aggressive, high-yield play. But after posting a 17 percent increase in revenue on a 465.8 percent forward leap in submetering sales, I’m ready to push the stock up to the Conservative Holdings, as worthy for even the risk-averse.

Submetering has become an increasingly profitable business for EnerCare and should continue a robust rate of growth for at least the rest of the year, as landlords and consumers look for ways to cut energy costs. That’s providing a powerful source of cash flow for the company, even as the waterheater business is at last stabilizing. The second quarter was the fifth consecutive reporting period in which the company has cut its attrition rate among waterheater renters on Ontario.

And the regulatory restrictions on its marketing–which management says have tied its hands for years–will expire in the province in February 2012. That will free the company to aggressively pursue new business and to compete full bore against still smaller rivals.

Meanwhile, EnerCare is entering the Nova Scotia market in an alliance with Enbridge Inc (TSX: ENB, NYSE: ENB). Dividend increases may have to wait until the company’s post-February marketing push in the waterheater business.

But with the payout ratio in the second quarter down to just 50 percent, they’re not far off. And the yield in the meantime is nearly 9 percent. Buy EnerCare up to USD8 if you haven’t yet.

Extendicare REIT (TSX: EXE-U, OTC: EXETF)–Aug. 10 Flash Alert, Aug. 15 Flash Alert. This summer the company was on the verge of increasing its dividend for the first time since going trust in late 2006.

Then came a surprise ruling from Medicare officials in the US that basically rescinds a payment increase granted at the beginning of the year to compensate for rising costs. Management’s challenge now is to mitigate the loss of revenue with the growth of its Canadian business and in the US with a combination of operating cost cuts and low cost debt refinancing.

The bad news is dividend increases are on hold indefinitely. The good news is management has reaffirmed its intention and ability to maintain its current dividend rate, which equates to a yield of more than 11 percent. Second-quarter results produced a very conservative payout ratio of 64 percent, providing a sizeable cushion.

Refinancings from the US Dept of Housing and Urban Development are expected to shave USD14 million off costs. And management has identified measures to cut operating cost to reduce the impact on cash flow from USD15 million to USD20 million. That’s to counteract a USD57 million annualized revenue reduction from the Medicare cut as well as USD13 million to USD23 million in fees in the group therapy and assessment operation.

We’ll see how they do with these targets in coming quarterly results, with the next batch of numbers expected Nov. 4. Meanwhile, I expect the stock to hang around its current level. Extendicare REIT is a buy up to USD10 for those who don’t already own it.

IBI Group Inc (TSX: IBG, OTC: IBIBF)–Aug. 15 Flash Alert. This infrastructure-focused architectural firm posted its strongest second-quarter revenue and cash flows in history, as robust growth outside North America offset continued sluggishness in the US.

Cash flow margin rose to 15.4 percent of revenue from 14 percent a year ago, even as revenue surged 17.9 percent. Distributable cash flow per share rose 29.5 percent, pushing down the payout ratio to just 77 percent, the lowest level since the company’s January conversion to a corporation. Some 69 percent of revenue came from the public sector, a testament to the company’s flexibility and ability to win valuable contracts in far-flung regions of the world. And organic (or non-acquisition-related) revenue growth was 9.2 percent, a sharp improvement in the company’s existing array of businesses.

Because of the competitiveness of this industry and the fact that only recently has the payout ratio come down, I’d be surprised to see a dividend increase this year. But things are definitely headed in that direction. And yielding more than 8 percent, IBI Group is a solid buy for those who don’t already own it up to USD15.

Innergex Renewable Energy Inc (TSX: INE, OTC: INGXF)–Aug. 15 Flash Alert. The generator of wind and hydro power had a great quarter, as a 61 percent surge in output pushed up cash flow 84.3 percent. And with July and August above historical averages for water conditions, investors can look forward to a strong third quarter as well.

That being said, the key to dividend growth and therefore long-term returns is for management to execute on an ambitious pipeline of 312 megawatts of new generation. The plan will extend until 2017 and is expected to expand annual cash flow by CAD250 million-plus. It’s also being financed without additional equity, so the benefit will flow through to shareholders, mostly likely with robust dividend growth.

That was a stated objective of management when the income trust combined with its parent last year. My buy target for Innergex Renewable Energy remains USD10 for those who don’t already own it.

Just Energy Group Inc (TSX: JE, OTC: JUSTF)–Aug. 12 Flash Alert. Just Energy continues to expand its retail electricity and natural gas business throughout North America, both with new sales at existing operations and by acquisitions. The latest of the latter category is the purchase of Fulcrum Retail Holdings, which will add 240,000 customers in Texas. The deal is expected to close Oct. 1 and will further expand the company’s operation into the US.

The company’s shares have been weakening since spring. There was a brief rebound following the release of fiscal first-quarter earnings, which produced profits 5 percent ahead of management’s target. The shares then slid back to their low again, though their move didn’t correspond with any hard news on the company. The result is an opportunity for those who don’t own this stock to buy in to a yield of almost 10 percent.

Management expects its payout ratio–which it calculates by including marketing expenses–to be around 100 percent this fiscal year. That may inhibit any dividend increases this year, the last being in mid-2008. One reason is low natural gas prices, which have forced the company to keep its contracted power prices low. The beauty of Just Energy, however, is that its bottom line ultimately doesn’t depend on energy prices but on how well it hedges its various exposures to commodity prices.

And this it’s done very well year after year, even while growing the company. Buy Just Energy Group up to USD16 if you haven’t yet.

Keyera Corp (TSX: KEY, OTC: KEYUF)–August 2011 CE Portfolio Update. My only problem with Keyera remains its high-flying shares, which at their current level are priced to yield just 4.2 percent. However, the stock would be a super bargain on any dip to my target of USD38, a level it’s hit several times this year and at which it would yield a bit over 5 percent.

The company looks set to grow its dividend at a 5 to 7 percent annual rate over the next few years, as it expands its well-positioned asset base serving the fastest-growing areas of Canada’s energy patch: natural gas liquids (NGLs), light oil and gas from shale and oil sands. And as it proved in 2008-09, its customer base and fee-based revenue stream are quite recession resistant.

I will raise my buy target after the next dividend increase, which management has indicated will be an annual event. The last boost was announced in February 2011. Buy Keyera on dips to USD38 or lower if you haven’t yet.

Northern Property REIT (TSX: NPR-U, OTC: NPRUF)–Aug. 10 Flash Alert. As I point out in this month’s Dividend Watch List, Northern Property will likely be forced to abandon its current structure should the Canadian government adopt a proposed tax on “stapled shares,” which combine debt and equity into a single security. The good news is its maximum additional tax burden would be just CAD1.5 million, which poses no threat to its current dividend though it could stall or curtail future boosts.

The bottom line is this REIT has an extremely high-quality portfolio that it’s been able to add to judiciously and conservatively to boost cash flow over time. Vacancy rates rose little portfolio-wide even in the worst of the 2008-09 market crash/credit crunch/recession, thanks to Northern’s focus on remote areas where it’s often literally the only game in town.

Not every foray has been a bonanza, but all have added to cash flow, which has continued to rise. In light of strong second-quarter results, I’m lifting the buy target to USD30 for those who don’t already own Northern Property REIT.

Pembina Pipeline Corp (TSX: PPL, OTC: PBNPF)–August 2011 CE Portfolio Update. Pembina should see a sizeable boost in cash flow in the second half of 2011, thanks to the on-time and on-budget startups of the Nipisi and Mitsue heavy oil pipelines. And the company continues to execute on several other projects. The expansion of its Cutbank Complex gas processing will be completed in mid-2012, with the entire capacity locked up under contracts with a minimum of five years. That’s the kind of low-risk, fee-based expansion Pembina has successfully executed for years.

Management has stated it expects to generate enough incremental cash flows to restore annual dividend growth, initially at a 3 to 5 percent annual rate “post-2012.” That’s mainly because it wants cash flows to lead growth and to be able to cover taxes it will owe starting in 2015, and it never wants to be in a position where it has to consider a dividend cut. That should make any current owner of the stock breathe easy. New investors should wait for a drip to USD25 to buy Pembina Pipeline.

Provident Energy Ltd (TSX: PVE, NYSE: PVX)–Aug. 12 Flash Alert. Provident CEO Doug Haughey recently commented at a presentation that his company was in a “great position from a tax point of view in that we’re not paying any material cash taxes until 2015.” He went on to state that his “expectation is we’ll be able to move the dividend up” but with an eye to timing due to the tax issue.

That likely means dividend growth for the company will be muted in the near term. But it also gives me a great deal of confidence about Provident’s current payout level, which equates to a solid yield of about 6.5 percent. Timing of the next increase is likely to depend on how successful the company is acquiring and absorbing new fee-generating energy infrastructure. But a 51 percent increase in second-quarter 2011 operation margins is a good sign that things are going well and that the company is on pace to meet its goal of 5 to 7 percent annual cash flow growth.

This company has been all over the place the past several years, starting out as a Canada-based oil and gas producer, then adding midstream assets in the US and Canada before divesting everything but the Canada-based midstream assets. The current lineup is suitable for conservative income investors and makes Provident Energy a buy up to USD9 for those who don’t already own it.

RioCan REIT (TSX: REI-U, OTC: RIOCF)–August 2011 CE Portfolio Update. The owner of first-rank shopping malls and retail centers has been aggressively acquiring assets in both Canada and the US since the 2008-09 crash. Management has utilized the secure cash flows from its own rents and access to low-cost debt and equity capital to do deals rivals haven’t been able to contemplate. As a result RioCan has widened its lead as Canada’s biggest REIT and now has some CAD9.5 billion in total assets, with operations on both sides of the border.

Up until the past few quarters, that expansion wasn’t fully reaching the bottom line because of dilution from equity issues, additional interest expense, acquisition costs and low interest earned on what routinely were huge cash balances. But after a 10.5 percent jump in operating funds from operations (6 percent per REIT unit), that’s no longer the case. As a result, the payout ratio is now back below 100 percent and falling.

Although management hasn’t committed to anything yet, that should open the door to a dividend increase; the last was declared in September 2008. Until that happens, my buy target for new investors on RioCan REIT remains USD25.

TransForce Inc (TSX: TFI, OTC: TFIFF)–August 2011 CE Portfolio Update. The transport company’s major goal since midway through the last decade has been to acquire smaller rivals, cutting costs by eliminating duplication of effort while building on each others’ strengths. That strategy continues to bear fruit on the earnings front, with second-quarter profits excluding one-time gains surging 20.8 percent. Revenue rose 27.5 percent, exclusive of the fuel cost surcharge that’s automatically passed through to customers to eliminate fuel cost risk to TransForce.

With a bevy of deals inked this year, earnings look set to maintain their upward trajectory the rest of the year. The dividend was hiked 15 percent in May and, given management’s desire to keep growing and the soft economy, is unlikely to be increased again before next year.

That being said, the stock now trades at just 53 percent of rapidly growing sales, largely on misplaced concern about the company’s potential vulnerability to a North America. Even in 2009 it was able to cover its dividend and fund growth with cash flow. TransForce is a solid value for growth and income anytime it trades below USD16.

Aggressive Holdings

Acadian Timber Corp (TSX: ADN, OTC: ACAZF)–Jul. 29 Flash Alert. Companies producing natural resources fell across the board in August on recession fears. And despite a very conservative balance sheet and dividend policy, Acadian was no exception. As a result investors have another opportunity to buy in to a premier timber play yielding more than 8 percent.

Second-quarter results were solid though seasonally weak, as is always the case due to weather conditions and the impact of winter breakup season. The company’s ace in the hole: growing demand in Asia and other emerging markets that’s offsetting the continued weakness in the US homebuilding industry, traditionally its key market. That promises substantial upside for earnings and the stock, though probably not until fears of a new global recession recede. Buy Acadian Timber up to USD13 if you haven’t already.

Ag Growth International Inc (TSX: AFN, OTC: AGGZF)–Aug. 15 Flash Alert. Demand for Ag Growth’s grain handling equipment has been robust this year, particularly in the markets outside North America it has cultivated. Second-quarter cash flow and revenue hit new records, and management indicated it expected solid growth in the second half of the year. That’s despite weak demand in western Canada related to the weather’s negative impact on planting as well as a higher price for the steel used in manufacturing.

The monthly dividend was last increased November 2010. Management, however, has historically not followed a set schedule for boosts, with the previous increase in August 2008, preceded by a December 2005 increase, an August 2005 boost and a June 2005 hike. The low payout ratio of 66 percent in what’s generally a seasonally weak quarter leaves the door open for one, as do the general lack of debt maturities until 2014. But management may also be cautious depending on how the economy performs.

In any case, the stock is selling nearly 30 percent the highs it reached earlier this year and yields 6 percent. That’s real value for those willing to live with a little potential near-term volatility. Ag Growth International is a buy up to USD50 for those who don’t already own it.

ARC Resources Ltd (TSX: ARX, OTC: AETUF)–August 2011 CE Feature Article. ARC’s extremely favorable production profile is its primary attraction. In a quarter when rivals struggled with higher costs and weather conditions, it boosted output from its deep-pool resource base by 24.4 percent, cut operating costs and ramped up capital spending for further development.

I’m not expecting to see dividend growth unless and until natural gas prices pull up to at least USD5 per million British thermal units. But the current price is roughly 80 cents per dollar of reserves, making ARC a solid bargain for those who want a low-risk energy play that pays a steady monthly dividend. ARC Resources is a buy up to USD26.

Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF)–August 2011 CE Portfolio Update. Chemtrade’s appeal for me is two-fold. First, management has adopted an extremely conservative dividend payout policy and in recent years has repeatedly proven its assertion that it can’t conceive of a scenario that would mandate a cut. Second, management has put assets in place that ensure robust growth going forward, even if demand for its industrial chemicals and services should slump in a new global recession.

Producing and selling chemicals is a dangerous business, and the company has seen major facilities go down for uncomfortably long periods of time. What Chemtrade produces, however, is absolutely essential to major processes, and it has a unique position in its markets. That saved the day in 2008-09, when the global recession did crunch industrial production, and it did again last year when one of the company’s major facilities was forced to shut down.

I still consider the stock to be an Aggressive Holding because of its economic exposure. But there are few stocks with such upside that yield 9 percent with such a solid record of dodging risk. Chemtrade Logistics is a buy up to USD15.50 for anyone who doesn’t already own it.

Daylight Energy Ltd (TSX: DAY, OTC: DAYYF)–August 2011 CE Feature Article. Daylight shares have come off considerably this year, but it’s hard to blame operating results. The company did see lower output versus the first quarter of 2011 as well as the year-earlier period. The reasons for the shortfall, however, are purely ephemeral, mainly a maintenance outage at a light oil facility, a disruption at a third party-owned natural gas processing plant and previously announced asset sales, which have provided funds to develop the company’s core shale assets.

Even with these problems, operating costs per barrel of oil equivalent are 9 percent lower this year. The payout ratio was only 41 percent. Daylight announced last month that weather-related delays would again impact third-quarter results but that fourth-quarter output would be back on track with previously announced guidance. Meanwhile, it continued to ramp up capital expenditures to fuel output going forward, sending more than twice as much in the second quarter of 2011 as in the year-ago period.

Pessimism likely lies with low natural gas prices and the dip in oil prices in August. That, however, has given investors a chance to buy Daylight with a yield of nearly 8 percent. As with ARC, I’m not expecting a payout increase until gas does recover. But the current payout is in no danger and there’s plenty of potential upside. My buy target for Daylight Energy remains up to USD11.

Enerplus Corp (TSX: ERF, NYSE: ERF)–August 2011 CE Portfolio Update. Also yielding 8 percent, Enerplus remains one of the most underrated energy companies around. Management is now projecting output growth of 10 to 15 percent through 2012, as it develops its long-life, deep-pool reserves, particularly in the Bakken (light oil) and Marcellus shale (natural gas).

At the same time, management is also projecting the company will be free cash flow positive in mid-2012, indicating it will be able to finance its growth internally and without adding debt or equity. That’s a very conservative growth plan. Should oil prices really crater to 2008 lows, it may become more difficult to do. Short of that, however, it looks like a formula to fuel Enerplus’ cash flows at a robust rate going forward.

I wouldn’t expect a dividend increase unless natural gas prices can move higher. But neither the current dividend rate nor growth plan dependent on such a welcome development. Trading below the value of its reserves in the ground, Enerplus is a buy up to USD33.

Newalta Corp (TSX: NAL, OTC: NWLTF)–August 2011 CE Portfolio Update. No energy services company stock is going to perform well in the market when investors are worried about a possible recession and its potential impact on energy prices. Consequently, it’s no great surprise that Newalta shares have been intensely volatile since summer began, despite the company’s robust earnings.

The good news is the company does continue to grow by adding assets and expanding sales at existing operations. In late August it took a major leap into oil sands, winning a three-year, CAD60 million contract with the Syncrude partnership to process waste from its production. Operated by Exxon Mobil (NYSE: XOM) and with Canadian Oil Sands Ltd (TSX: COS, OTC: COSWF), Syncrude has big plans to expand its oil sands output and the deep pockets to do it. Newalta’s new contract doesn’t guarantee a piece of the action. But it does position the company ahead of rivals to get this business.

Newalta doesn’t yield as much as most other CE Portfolio Holdings. But it did raise dividends twice in the past year, a sure sign of a company on the come. Buy Newalta up to USD15 for growth and modest income.

Parkland Fuel Corp (TSX: PKI, OTC: PKIUF)–August 2011 CE Portfolio Update. The company posted second-quarter cash flow that provided solid dividend coverage and demonstrated the value of recent acquisitions but also held some room for improvement. And in a fear-laced environment like this one, at least some investors took that as a sign of trouble, both for management’s growth plans in the fuel distribution business and the current dividend. The yield of more than 10 percent clearly reflects this skepticism, though Bay Street remains generally bullish with four “buy” recommendations, two “holds” and no “sells.”

The only significant development in the past month was the announced CAD23.5 million sale of the company’s long-haul transportation businesses, a deal management expects to be accretive to both buyer and seller. Parkland has entered a multi-year agreement for distribution services with the owner of its former unit, which account for less than a third of the company’s total long-haul transportation operations in Canada.

The deal should allow Parkland to devote more funds and efforts to other operations, providing the opportunity for fresh eyes to identify more efficiencies organization-wide. That’s very likely the key to boosting the profitability of the acquisitions and raising cash flows.

My expectation is still for a Parkland dividend increase sometime in the next 12 to 18 months, as these synergies are realized. Meantime, the current dividend remains a high priority, and cash flows should cover it comfortably in the second half of 2011, which also tend to be seasonally stronger than the second quarter. My advice remains to buy Parkland Fuel up to USD13 if you don’t already own it.

Penn West Petroleum Ltd (TSX: PWT, NYSE: PWE)–Aug. 10 Flash Alert. This company continues to hold the richest oil and gas land base in Canada. It’s also proven its ability to arrange financing to develop it, inking a shale gas and oil sands deal with Korean and Chinese investors, respectively. And despite weak production due to weather-related events this year, it looks set for robust oil-weighted production growth for years to come.

Where the company has proven remarkably tone-deaf is figuring out how to please its shareholder base. For months before it converted to a corporation in 2010, management seemed to relish telling investors it would be cutting dividends to the bone when it did become a corporation. As a result, while new Aggressive Holding Crescent Point Energy’s shares were zooming higher on its announcement to convert without cutting–cutting its cost of equity capital upwards of 50 percent–Penn West’s shares languished.

When the company actually converted, it didn’t cut as much as some envisioned. But many investors seemed to decide the cash payout was too low to stick around. After a brief uptick in the share price, they sold and Penn West slid again.

The company’s current approach to retail investors seems to be to try to convince them they’re better off getting a lower dividend for the promise of future growth.

Penn West’s strategy, of course, was based on management’s belief that institutional investors would pick up the slack, based on the company’s “growth” story.

But months after conversion, individuals are still more than 50 percent of the shareholder base. Institutions, meanwhile, appear to understandably be wary of buying another energy company at a time when so many are worried about a global recession, as most are evaluated by their funds’ annual returns.

From my perspective, Penn West’s reserves make it a value that will sooner or later show up in its share price. One obvious way to accomplish that quickly would be a more shareholder-friendly dividend policy. Barring that, investors are going to have to be patient. Penn West Petroleum is a buy under USD30.

Perpetual Energy Inc (TSX: PMT, OTC: PMGYF)–Aug. 10 Flash Alert. Perpetual remains a speculation on the price of natural gas. As I note in this month’s Dividend Watch List, second-quarter earnings appeared to be right in the middle of the guidance range management set earlier this year. And the company is executing on plans to ramp up natural gas liquids to 12 percent of total output by the end of the year.

That being said, the share price is still going to follow gas prices up and down, and a real up-move is only going to happen if gas can break back to USD5 per million British thermal units. This isn’t a stock to average down in or to count on income from. But it is a way to speculate on gas while getting paid to wait. Buy Perpetual Energy up to USD5 if that’s your objective and you can stomach the risk and the volatility.

Peyto Exploration & Development Corp (TSX: PEY, OTC: PEYUF)–Aug. 12 Flash Alert. This company has managed to roll up another year of handsome returns, even as the rest of the natural gas sector has been mired in weakness. The key is low-cost production, based on some of the most valuable reserves in Canada and a deep pool of talented personnel.

My problem with the stock is price, as at least some investors keep paying through the nose to buy it. Also note that Peyto’s yield is below that of many producers, owing to management’s desire to develop its base with internal capital as much as possible. I would expect to see a dividend boost if gas prices bounce, however. My target remains USD23 for those who don’t already own Peyto Exploration & Development.

PHX Energy Services Corp (TSX: PHX, OTC: PHXHF)–August 2011 CE Portfolio Update. Energy services companies are leveraged to energy prices in two ways. When prices rise, demand for their rigs and services surges, as does what they can charge for their use. When energy prices fall, demand drops, shrinking both revenue and profit margins. The drop in oil prices in August seems to have spooked many investors into selling PHX and other energy services firms. Ironically, second-quarter results and management guidance for the rest of the year indicate PHX’s numbers should again be robust.

One reason is the company’s expansion outside of North America, which has exposed its business cycle to the price of Brent rather than West Texas Intermediate crude. Brent has been much higher priced than its counterpart, and it remains in position to keep drilling conditions very healthy where it’s the benchmark. The company is also poised to get a benefit from being able to use its own equipment, after a period when it was forced to rent in order to win and fulfill contracts.

The yield of 5 percent looks solid, though the payout ratio will have to come down a bit for it to be raised. But PHX is a solid growth and income bet on a sector that should roar to life in coming months, even if energy prices just stabilize where they are now. Buy PHX Energy Services up to USD14 if you haven’t yet.

Student Transportation Inc (TSX: STB, NSDQ: STB)–Sept. 23 (estimate). We’ll get our first post-purchase numbers for Student Transportation later this month. But the company’s announcement last month that it had completed four acquisitions and inked 14 new contracts to lift profit 12 percent for this fiscal year is very encouraging indeed. So is the Nasdaq listing that went live on Sept. 6 under the symbol STB.

The company is using the symbol to expand access to US investors, which in turn promises to fuel even more growth in a USD24 billion industry that remains two-thirds controlled by increasingly cash-strapped government agencies and school districts. That growth should eventually fuel an increase in the 8 percent plus dividend. But for now Student Transportation is a solid buy for growth and income up to USD7.

Vermilion Energy Inc (TSX: VET, OTC: VEMTF)–August 2011 CE Portfolio Update. Vermilion isn’t likely to raise its dividend until the Corrib field–its most ambitious capital project to date–actually begins producing natural gas for sale in the gas-starved European market. When that happens, investors can expect a robust increase, though management’s interest will continue to be on sustainability of production and reserves that requires capital investment.

In the meantime, Vermilion’s ability to price its output in Asia, Europe and the Americas simultaneously gives it a huge advantage over other Canadian producers, who are largely locked into North American pricing. The company currently has more than half of its output priced to Brent crude, for example. That’s solid insurance for the current dividend as well as current plans to boost output more than 10 percent a year.