Three more Canadian Edge companies reported earnings this week. Though they continue to face challenges from the slowing North American economy, the good news is that they to generate cash flows that are more than sufficient to cover their payouts.

Industrial waste-management firm Newalta Corp (TSX: NAL, OTC: NWLTF) reported a three percent increase in revenue for the first quarter, to CAD171.3 million, while profits nearly tripled, to CAD14.2 million.

Nevertheless, the company missed analyst estimates by a sizable margin for both sales and earnings per share. But Newalta’s shares still rose 2.6 percent in the trading session that followed its earnings release. And Bay Street’s sentiment remains largely unchanged on the stock, with nine “buys” and one “sell,” though several analysts lowered their 12-month price targets. The consensus price target now stands at CAD16.93, which is 21.3 percent higher than the current share price.

Similar to last quarter, Newalta’s results were dampened by falling commodity prices and a decline in drilling activity in Western Canada. A majority of the firm’s revenue is now derived from offering waste management and recovery solutions to the energy sector, and those sales accounted for 76.1 percent of profits in 2012 and 85.2 percent of profits in first-quarter 2013.

As of the beginning of the year, Newalta reorganized into three divisions, and now reports results for each of these segments, in addition to the firm’s overall performance.

Although the company’s fast-growing New Markets division, which specializes in clean-up and recycling at unconventional energy plays among US shale formations and Canada’s oil sands, is still dwarfed by its Industrial division in terms of revenue, it now delivers the bulk of the firm’s gross profits.

For full-year 2012, the New Markets division accounted for 26 percent of total revenue and nearly 40 percent of profits. But during the first quarter, profits at this division fell 8.5 percent year over year, to CAD13 million, accounting for just 34.4 percent of net income. Over the long term, the company hopes to achieve 30 percent annual growth from this segment by aggressively expanding its network, as well as generating stable cash flows via long-term contracts from its onsite facilities.

By contrast, the Oilfield division, which handles waste-processing for conventional and unconventional energy plays, accounted for 50.8 percent of first-quarter profits, even though segment profits fell 1.5 percent, to CAD19.2 million.

As part of the operations at these two divisions, Newalta recovers significant quantities of crude oil, which it’s then able to sell. In the first quarter, for example, the company’s New Markets and Oilfields divisions recovered 141,800 barrels of oil. That was an increase of 13.8 percent over the prior year’s quarter, but the higher volume was more than offset by the drop in Canadian crude prices resulting from a lack of pipeline capacity. Revenue from crude oil sales fell 6 percent, to CAD9.4 million.

The slower-growing Industrial division, which offers waste-management and recovery solutions to a wide array of Canadian industries, had a modest 2.5 percent bump in revenue, but saw gross profits tumble 39.1 percent, to CAD5.6 million.

Funds from operations (FFO), the relevant metric when it comes to the firm’s ability to fund its dividend payout, fell 29 percent, to CAD23.7 million. But the firm’s payout ratio for the quarter was still a conservative 23.1 percent of FFO. Meanwhile, Newalta’s board approved a 10 percent boost to the company’s quarterly dividend, to CAD0.11 per share, for its next payout.

Management expects to see its bottom line improve as a result of its investments in organic growth, such as its expansion into US markets, as well as a rebound in commodity prices. For the second quarter, it forecasts adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) to jump 20 percent from a year ago, thanks to growth in its New Markets division.

Management intends to focus capital spending on projects tied to long-term contracts and is on track to deploy roughly 40 percent of its planned CAD190 million in 2013 capital expenditures during the first half of this year.

Newalta’s fortunes are closely aligned with the energy sector, so investors should be prepared to endure the volatility inherent in its exposure to this space. The small-cap stock is off 9.9 percent year to date and down almost 15 percent from its 52-week high. Newalta’s shares currently yield 2.9 percent and remain a buy up to USD16.50 in the Aggressive Portfolio.

RioCan REIT (TSX: REI, OTC: RIOCF) reported CAD124 million in first-quarter funds from operations (FFO), an increase of 20 percent year over year. On a per-unit basis, FFO increased 11 percent, to CAD0.41, for a conservative dividend coverage ratio of 28.7 percent for the quarter. However, as has been the case in recent quarters, nearly all of this growth was driven by acquisitions.

Indeed, the slowing US and Canadian economies continue to weigh on RioCan’s portfolio of shopping centers. During the first quarter, RioCan’s Canadian properties posted just 0.1 percent in same-store growth and 0.3 percent in same-property growth. In the US, same-store and property growth was just 1.4 percent year over year.

RioCan focuses on acquiring real estate assets in high-growth markets. In Canada, for instance, the contribution of its properties in these markets toward its annualized rental revenue is approaching 70 percent. That enabled the company to increase the average rent at its Canadian properties by 13.4 percent year over year.

RioCan’s committed occupancy rate remains a strong 97 percent, up 0.1 percentage points from a year ago, but down 0.4 percentage points from the fourth quarter. Part of this drop is due to vacancies at locations formerly occupied by Canadian retailer Zellers, which pushed retention rates at RioCan’s Canadian properties down to 68.3 percent. Absent the effect of Zellers, the retention rate was 81.1 percent, which was still a marked decline from the average retention rate of 90.1 percent during 2012.

Fortunately, RioCan has significant liquidity to continue acquiring income-producing properties. During the quarter, it bought interests in two shopping centers in the US and Canada, for CAD19 million, with a weighted average capitalization rate of 6.3 percent.

After quarter-end, RioCan acquired four more Canadian shopping centers for CAD418 million, with a weighted average capitalization rate of 5.2 percent. The REIT also bought the remaining 20 percent stake in eight advantageously situated properties in high-growth areas of Texas from Retail Properties of America Inc (RPAI), while selling its interests in five other Texas properties. RioCan purchased RPAI’s stakes for CAD96.6 million, while it sold its share of the other five properties for CAD102.8 million. The acquired interests have a 6.9 percent capitalization rate.

RioCan also continued to dispose of properties in areas with lower growth, with CAD364 million worth of real estate sold or under contract to be sold at quarter-end.

At the same time, the REIT continues to take advantage of historically low interest rates by issuing new debt to retire older obligations that have higher coupons. For example, RioCan issued CAD250 million in five-year senior unsecured debt with a rate of 2.87 percent and CAD200 million in 10-year senior unsecured debt with a rate of 3.725 percent. Management plans to use part of the proceeds from these offerings to redeem CAD150 million in debentures that have a 5.65 percent coupon.  

Bay Street analysts maintained their ratings mix, with three “buys” and six “holds,” but several boosted their buy targets. The consensus 12-month price target now stands at CAD30.75, which is 6.3 percent higher than the current unit price.

Units of the REIT are up 5.2 percent year to date, but still trade 1.6 percent below their 52-week high. RioCan’s units currently yield 4.8 percent and remain a buy up to USD28 in the Conservative Portfolio.

With its network of nearly 15,600 realtors, Brookfield Real Estate Services Inc (TSX: BRE, OTC: BREUF) boasts a substantial 24 percent share of the Canadian residential real estate market. The brokerage reported first-quarter cash flow from operations (CFFO) of CAD5.6 million, which was essentially flat versus the prior year’s quarter.

However, the company faced a tough comparison, as the prospect of tougher rules for mortgage lending pushed real estate activity forward during the first half of last year.

Canadian regulators subsequently tightened mortgage-lending requirements to rein in an overheated real estate market. As a result, there was a 12.2 percent drop in transaction volumes during the first quarter, though home prices remained stable. Ontario accounts for a majority of Brookfield’s revenue (59 percent during the first quarter), and transaction volumes there were slightly stronger than the overall Canadian real estate market, though they still fell 10.5 percent year over year.

Despite the overall slowdown in the Canadian economy, management believes that much of the correction in real estate is past and expects a rebound in transaction volumes to more normal levels during the second half of the year.

Brookfield has a fixed-revenue structure that’s dependent upon the number of realtors in its network. During the first quarter, variable revenue accounted for just 20.5 percent of the company’s CAD8.1 million in total revenue. While the fixed-fee approach can bolster revenue during downturns, it also means the company doesn’t fully experience the gains that occur amid frothier markets.

CIBC World Markets is the only firm on Bay Street that tracks Brookfield Real Estate Services at present. Its analyst last affirmed a “hold” rating in late March, with a 12-month price target of CAD13.50.

The company’s shares are up 2.6 percent year to date, but down 6.1 percent from their 52-week high. Brookfield Real Estate Services’ stock currently yields 8.5 percent and remains a buy up to USD14 in the Conservative Portfolio.

The Roundup

Here’s when Portfolio Holdings will report numbers for the first quarter of 2013. Those that have revealed firm dates for announcements are noted as “confirmed,” while we provide an “estimate” for those yet to make specific commitments. Follow the links to read our analysis of those companies that have already reported.

Conservative Holdings

• AltaGas Ltd (TSX: ALA, OTC: ATGFF)–May Portfolio Update
• Artis REIT (TSX: AX-U, OTC: ARESF)–May 7, after the market’s close (confirmed)
• Bird Construction Inc (TSX: BDT, OTC: BIRDF)–May 14 (estimate)
• Brookfield Real Estate Services Inc (TSX: BRE, OTC: BREUF)–May 7 Maple Leaf Memo
• Brookfield Renewable Energy Partners LP (TSX: BEP-U, OTC: BRPFF)–May 8 (confirmed)
• Canadian Apartment Properties REIT (TSX: CAR, OTC: CDPYF)–May 7, after the market’s close (confirmed)
• Cineplex Inc (TSX: CGX, OTC: CPXGF)–May 9 (confirmed)
• Davis + Henderson Income Corp (TSX: DH, OTC: DHIFF)–May 7, after the market’s close (confirmed)
• Dundee REIT (TSX: D-U, OTC: DRETF)–May 8 (confirmed)
• EnerCare Inc (TSX: ECI, OTC: CSUWF)–May 14 (confirmed)
• Innergex Renewable Energy Inc (TSX: INE, OTC: INGXF)–May 14 (confirmed)
• Keyera Corp (TSX: KEY, OTC: KEYUF)–May 7, after the market’s close (confirmed)
• Northern Property REIT (TSX: NPR, OTC: NPRUF)–May 8 (confirmed)
• Pembina Pipeline Corp (TSX: PPL, NYSE: PBA)–May 9 (confirmed)
• RioCan REIT (TSX: REI, OTC: RIOCF)–May 7 Maple Leaf Memo
• Shaw Communications Inc (TSX: SJR/A, NYSE: SJR)–May Portfolio Update
• Student Transportation Inc (TSX: STB, NSDQ: STB)–May 10 (confirmed)
• TransForce Inc (TSX: TFI, OTC: TFIFF)–May Portfolio Update

Aggressive Holdings

• Acadian Timber Corp (TSX: ADN OTC: ACAZF)–May 9 (confirmed)
• Ag Growth International Inc (TSX: AFN, OTC: AGGZF)–May 15 (confirmed)
• ARC Resources Ltd (TSX: ARX, OTC: AETUF)–May Portfolio Update
• Atlantic Power Corp (TSX: ATP, NYSE: AT)–May 8 (confirmed)
• Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF)–May 15 (confirmed)
• Colabor Group Inc (TSX: GCL, OTC: COLFF)–May Portfolio Update
• Crescent Point Energy Corp (TSX: CPG, OTC: CSCTF)–May 9 (confirmed)
• Enerplus Corp (TSX: ERF, NYSE: ERF)–May 10 (confirmed)
• Extendicare Inc (TSX: EXE, OTC: EXETF)–May 9 (confirmed)
• IBI Group Inc (TSX: IBG, OTC: IBIBF)–May 9 (confirmed)
• Just Energy Group Inc (TSX: JE, NYSE: JE)–May 16 (confirmed)
• Newalta Corp (TSX: NAL, OTC: NWLTF)–May 7 Maple Leaf Memo
• Noranda Income Fund (TSX: NIF-U, OTC: NNDIF)–May 15 (confirmed)
• Parkland Fuel Corp (TSX: PKI, OTC: PKIUF)–May 7, after the market’s close (confirmed)
• PetroBakken Energy Ltd (TSX: PBN, OTC: PBKEF)–May Portfolio Update
• Peyto Exploration & Development Corp (TSX: PEY, OTC: PEYUF)–May 8 (confirmed)
• Vermilion Energy Inc (TSX: VET, OTC: VEMTF)–May Portfolio Update
• Wajax Corp (TSX: WJX, OTC: WJXFF)–May 10 (confirmed)