May’s High Yield of the Month selections come from different ends of the risk-reward spectrum. From the Conservative Holdings is Keyera Corp (TSX: KEY, OTC: KEYUF), a CE Portfolio member since April 2005 backed by a strong balance sheet and fee-based income from some of the most valuable energy midstream assets in Canada.

From the Aggressive Holdings is Acadian Timber Corp (TSX: ADN, OTC: ACAZF), owner and operator of timber properties in Eastern Canada and New England. A CE Portfolio member for a little more than a year, its earnings depend as much on the global price of hardwood and softwood as on management’s ability to run a strong operation.

These companies have one thing in common: An investing public focused on chasing performance is largely ignoring both. As a result both are selling below my buy targets and are ripe for purchase, in particular by anyone who doesn’t already own them.

After holding up well in the turbulent spring and summer of 2011 Keyera suddenly attracted a wave of buyers in the fourth quarter.

Shares pushed to a new all-time high over USD50 early in 2012, as investors paid dearly for pipeline stocks, particularly those with natural gas liquids (NGL) exposure.

Then suddenly the shares began to sell off, finally hitting a low of USD37.50 in mid-April before bouncing back over USD41 this week.

Keyera has been one of the worst performers of the Canadian Edge Conservative Holdings thus far in 2012, giving up nearly 15 percent even including the monthly dividend.

Ironically, the actual company news is as positive as it was when the stock was making new highs. In fact it’s arguably in the best shape of any time since its initial public offering back in May 2003.

From its earliest days Keyera has followed an invest-to-grow model, steadily and consistently adding midstream energy assets in the most productive areas of Canada’s energy patch.

Today the company’s most important assets are gathering systems, processing facilities, storage caverns and transportation pipelines focused on natural gas liquids and condensates. And it continues to add to them with a combination of acquisitions and new construction.

The completion of a new condensate pipeline to serve rapidly growing oil sands producers in the first quarter is already adding to earnings. So is the Edmonton isooctane manufacturing facility purchased in January for USD194 million. New storage caverns at the Fort Saskatchewan facility will be ready for startup in the second quarter. So will new pipeline and pumping facilities at the Edmonton Terminal, which are contracted to Imperial Oil Ltd (TSX: IMO, NYSE: IMO) under a long-term deal that starts Jul. 1.

All of these assets earn fees based on a combination of capacity payments from shippers and throughput. Meanwhile, Keyera’s marketing operation leverages the products and byproducts from its operations, including butane, condensate, propane and crude oil.

The result is a remarkably steady and growing stream of cash flow for the company, which it’s shared with investors in regular dividend increases. Keyera actually raised the payout twice in 2011, just months after it converted from income trust to corporation and began absorbing corporate taxes.

The steep drop in natural gas prices has hurt throughput at certain gathering assets located in more dry gas-focused areas. As CEO James Vance Bertram stated in a conference call a couple months ago, the pricing environment for dry gas is “similar to the one experienced in 2008.” The “producers focused on drilling the best prospects and relied on NGLs” and “producers are taking the same approach here again in 2012.”

That’s exactly what’s showing up right now in Keyera’s numbers. Demand for liquids infrastructure has rarely been greater, and the company is rushing to meet it.

That’s more than offset slumping results on the dry gas side. And since global markets are hungry for NGLs and oil–which can be exported–there’s no reason to expect this won’t be the case for a long time to come.

Keyera expects to make between CAD125 million and CD175 million in capital expenditures in 2012, excluding acquisitions. These will be focused on big liquids-rich areas of the business where producers have expressed interest in securing additional capacity.

Management also appears to have factored in shut-ins of dry gas to its plans, further eliminating risk from falling gas prices. And it continues to hedge exposure of inventory in storage to zero out commodity price risk as well.

Capital spending will be the primary driver of future earnings as well as dividend growth we’re likely to see later this year. I look for a long-term rate of growth of at least 5 percent to complement the 5 percent-plus yield, a very nice combination for a company with such reliable revenue streams.

The company has certainly had no trouble raising low-cost capital to finance its plans. Last week Keyera executed a private placement of CAD200 million in notes with seven- and 12-year maturities and partially priced in US dollars. The average weighted rate of interest for the 12-year paper was a modest 5.41 percent, with the seven-year paper around 4 percent. The company also sold CAD202.7 million of equity as underwriters exercised their maximum purchase option at a price of CAD43 per share.

Earnings are due out May 8. But investors can buy Keyera with confidence up to my buy target of USD42.

Acadian’s current value, by contrast, is mainly from its yield of roughly 7.4 percent. The currently quarterly rate of CAD0.20625 per share was put in place with the April disbursement. Although it remains well covered by distributable cash flow, barring a significant drop-down of assets from parent Brookfield Asset Management (TSX: BAM/A, NYSE: BAM) it’s unlikely to be increased.

A drop-down is likely at some point, given Brookfield’s previous combinations of its renewable energy and real estate sales operations. In the meantime, however, investors can only be patient for such a possibility as well as a prospective rebound in the global timber market.

Any sort of rebound in the US homebuilding market would be a tremendous plus for profitability as well as for the stock. Management would definitely take anything it could get on that score. But the company’s focus is clearly on what it can control, mainly costs and running its 1.1 million acres of freehold timberlands in Maine and New Brunswick, Canada.

The second-largest timberlands operator in Maine, the company also provides management services to 1.3 million acres of Crown licensed timberlands and operates a forest nursery in New Brunswick.

Looking ahead, Acadian sees a “stable” market for hardwood sawlogs, offset by “softer” prices for softwood pulpwood. The company also expects its sales to biomass-fueled manufacturers will be steady but worries “stand alone” biomass power plants will suffer from lower wholesale electricity prices, which are caused by lower natural gas prices.

Overall, however, management expects “considerably stronger” cash flow in the usually seasonally weak second quarter, on the strength of improving efficiencies and streamlining expenses.

And CEO Reid Carter states he has “considerable confidence that Acadian is well positioned to meet its dividend target for 2012 and beyond.”

First-quarter 2012 numbers were indeed promising in that regard. Net sales dipped 26.6 percent and cash flow margins fell to 24 percent from 35 percent a year earlier. The shortfall was virtually all weather-related, as solid harvesting conditions in January and February were interrupted by an early spring break-up caused by exceptionally warm weather in early March. That forced the company to hold a large number of harvested logs in inventory, which essentially means income from them won’t be recognized until the second quarter.

On the other hand, the company was able to employ new approaches that dramatically improved contractor availability, enabling it to meet targeted harvest levels. There were no recordable safety incidents among employees or contractors during the quarter, always a major concern in an industry such as logging.

Finally, free cash flow continued to cover the dividend comfortably, even as the second quarter promises an improvement over last year.

The overall picture is of remarkable stability, particularly for an industry where profits depend on the price and demand for an often volatile-priced commodity. And there’s remarkably little debt attached to the company’s vast reserves, with no maturities due until 2016.

Acadian, unlike Keyera, is actually up for 2012 but has generally underperformed over the past year. The stock has been basically locked in a trading range since early February. But upside is at least the mid-teens as conditions improve.

Acadian Timber is a buy up to USD13, a level it nearly saw a year ago and only approached once before, in autumn 2008.

What can go wrong at Keyera and Acadian? The fact that prices haven’t gone parabolic, as stocks of so many successful companies have, is a clear sign of a fair amount of investor skepticism. So is the fact that all four analysts covering Acadian rate it a “hold,” while the count for Keyera is five “buys,” three “holds” and a “sell,” considerably worse than just a few months ago.

That means neither company has a particularly high bar of investor expectations to hurdle in the near term. Neither is challenged by credit, nor would they be even if conditions should tighten suddenly.

Acadian does earn a considerable amount of income in US dollars, but it’s the kind of commodity-based revenue that provides a natural hedge against any sort of decline in the US dollar.

Having US operations and access to markets south of the border could also prove to be a considerable growth engine for earnings. That’s especially true if the US economy continues to chug along and even accelerate. But given management’s dour outlook–and ability to keep product off the market if needed–there’s not really much exposure for Acadian even if the US slips again.

We’ve seen some weakening in propane prices, one natural gas liquid that makes its way through Keyera’s facilities. And some observers fear other NGL prices as well as oil will back off later this year, just as the price of dry gas has.

The key difference between NGLs/oil and dry gas is the former can be exported to other nations where demand is rapacious now, while dry gas is trapped here in North America, because all liquefied natural gas capacity is geared for import not export.

It is possible, however, that what’s happening in Europe will become a global contagion and that even growth in Asia will slow. That could cause a slowdown in the NGL and oil patch of Canada, just as it did for dry gas throughout North America.

At this point, however, drilling activity is accelerating in liquids-rich areas even faster than it’s slowing down for dry gas. That’s the clear upshot from the oil service company earnings we’ve seen to date. And it’s bullish for the throughput of Keyera’s assets.

In any case, energy infrastructure is the last area of the energy patch to suffer a downturn. That was clearly proven in 2008, a crisis Keyera responded to by increasing and then holding its dividend, even as it prepared to convert to a corporation. And with more areas than ever developing NGLs, the company is arguably in even better shape to deal with a still highly unlikely reprise.

In short, there’s not much to worry about with Keyera. There’s a bit more for Acadian, which makes it an Aggressive Holding. But it’s arguably the safest and easiest way to hold a vast reserve of timber, arguably North America’s most undervalued natural resource.

For more information on Acadian and Keyera, go to How They Rate. Acadian is tracked under Natural Resources, while Keyera is covered under Energy Infrastructure. Click on their US symbols to see all previous writeups in Canadian Edge and Maple Leaf Memo. Click on the Toronto Stock Exchange (TSX) symbol to go to their Google Finance pages for a wealth of information, ranging from news releases to price charts. Click on their names to go directly to company websites.

Keyera is reasonably large with a market capitalization of CAD3.1 billion, and there should be plenty of liquidity on both sides of the border. Acadian is smaller at CAD187.9 million. That’s in large part because parent Brookfield Asset Management (TSX: BAM/A, NYSE: BAM) owns 44.9 percent of the shares. The stock appears to be widely enough held in the US, however, for adequate liquidity. Investors can buy both stocks either on the Toronto Stock Exchange or on the US over-the-counter market (OTC) with the symbols ACAZF and KEYUF, respectively.

As is the case with all stocks in the Canadian Edge coverage universe, you get the same ownership whether you buy in the US or Canada. These stocks are priced in and pay dividends in Canadian dollars. Appreciation in the loonie will raise dividends as well as the value of your shares.

Dividends paid by both companies are 100 percent qualified for US income tax purposes. Both are former income trusts. Acadian converted to a corporation in early 2010. Keyera converted in January 2011. Dividends paid into a US IRA are not subject to 15 percent Canadian withholding tax, though they are subject to withholding at a 15 percent rate if held outside of an IRA.

Dividend taxes withheld from non-IRA accounts can be recovered as a credit by filing a Form 1116 with your US income taxes. The amount of recovery allowed per year depends on your own tax situation. Canadian investors will likely be able to defer a good chunk of their tax burden going forward as a return of capital.