Thus far in 2012 Canadian Edge Portfolio Conservative Holdings have returned an average of 11.5 percent. Aggressive Holdings are up 0.9 percent, and the three Mutual Fund Alternatives have returned 6.9 percent.

That’s considerably better than the 0.9 percent return for the S&P Toronto Stock Exchange Composite Index, which focuses on Canada’s largest companies.

It’s a bit worse than the 14.2 percent return from the S&P/Toronto Stock Exchange Income Trust Index–which is now basically a collection of Canadian real estate investment trusts–though our five REITs’ average year-to-date return of 19.7 percent certainly does measure up.

Buying and selling momentum have heavily affected performance this year. Rather than hunt down values, much of the money sloshing around this year has been in search of safety. Nothing has catalyzed buying more effectively than a rising share price.

And nothing has spurred selling more aggressively than falling stock prices, which have been taken as a sign of impending disaster.

The upshot is performance of individual stocks in the Portfolio has been quite jagged. TransForce Inc (TSX: TFI, OTC: TFIFF) continues to enjoy a breakout year, with a total return of nearly 50 percent in seven months-plus. Artis REIT (TSX: AX-U, OTC: ARESF) and Bird Construction Inc (TSX: BDT, OTC: BIRDF) have also been big winners, returning around 30 percent.

Squarely in the other camp are the two energy stocks I added in April: Pengrowth Energy Corp (TSX: PGF, NYSE: PWE) and PetroBakken Energy Ltd (TSX: PBN, OTC: PBKEF). Both are down about 20 percent since I swapped them for now-sold Enerplus Corp (TSX: ERF, NYSE: ERF) and Penn West Petroleum Ltd (TSX: PWT, NYSE: PWE).

Given the steep drop in oil prices during May, it’s not surprising stocks of energy producer would be down since April. And as long as worries about global economic health are on the front burner it’s reasonable to expect oil prices–as well as prices of other commodities–to remain volatile.

Consequently, no one should own any of our energy producers or other Aggressive Holdings unless they’re prepared for volatility.

The bigger issue here, however, is whether any of this year’s divergences really reflect any change in Portfolio stocks’ ability to build wealth over time.

Does outperformance signal companies are besting expectations as businesses, or simply the desire of investors to find security and therefore buying momentum?

Conversely, does the slide in a stock signal a loss of wealth building potential, or is it simply price momentum spurred by a fear of losses?

The only way to really answer those questions is to delve into the hard numbers companies release during earnings season. We now have second-quarter results for 30 of the 36 current Portfolio companies, including new Conservative Holding and August Best Buy Brookfield Real Estate Services Inc (TSX: BRE, OTC: BREUF).

Results for Brookfield Real Estate Services and Vermilion Energy Inc (TSX: VET, OTC: VEMTF) are highlighted in Best Buys. Shaw Communications Inc (TSX: SJR/A, NYSE: SJR) was the first Holding to report and was highlighted in last month’s Portfolio Update.

I focus on the rest below. As you peruse my analysis, please take careful note of three major questions.

First, how well did the company’s earnings cover its distribution? Was the coverage in line with management’s prior guidance, or did something happen to put its assumptions at risk and the dividend in danger?

Second, was the company able to stay on track with its long-range strategic plans? Commodity producers are going to see a hit to profits when the prices of what they pump, chop and mine drop. The important thing is that they maintain development of production and reserves despite the hit to revenue.

Finally, how does the company’s balance sheet look? Are credit lines still mostly undrawn? Is management still limiting near-term debt maturities and therefore controlling exposure to a sudden tightening of credit conditions if events in Europe suddenly go sideways?

I’ve tried to address these questions for each of the companies below and to put them in context of what’s happened to share prices since the beginning of 2012.

The first takeaway is nothing has really changed enough to merit selling any Holdings that have fallen or to raise buy targets meaningfully for most stocks that have been bid up.

That didn’t surprise me much. But the results do give every reason to be confident holding Canadian Edge Portfolio during uncertain times. And I expect to see the same thing when the remaining companies report in the coming days. The remaining schedule is as follows.

• Ag Growth International Inc (TSX: AFN, OTC: AGGZF)–Aug. 15
• EnerCare Inc (TSX: ECI, OTC: CSUWF)–Aug. 13
• Northern Property REIT (TSX: NPR-U, OTC: NPRUF)–Aug. 14
• Pengrowth Energy Corp (TSX: PGF, NYSE: PGH)–Aug. 13
• RioCan REIT (TSX: REI-U, OTC: RIOCF)–Aug. 13
• Student Transportation Inc (TSX: STB, NSDQ: STB)–Sept. 21

Here are the key numbers for Canadian Edge Portfolio Holdings that have reported. Note several were briefly reviewed in Flash Alerts sent out the past couple weeks. In the future, we’ll be using Alerts for preliminary analysis and required actions, with a full wrapup of the vital numbers in your regular issue. I don’t send out Flash Alerts for developments on non-Portfolio companies.

Conservative Holdings

Conservative Holdings are purchased for high, secure yields and long-term growth that’s not dependent on what happens to commodity prices. Stocks can occasionally get caught up in buying or selling momentum. But over time steady business growth will propel dividends and send share prices climbing.

AltaGas Ltd’s (TSX: ALA, OTC: ATGFF) second-quarter results were briefly highlighted in the Jul. 26 Flash Alert. The key number was the 75 percent payout ratio, which has likely laid the groundwork for another payout increase.

Normalized net income rose 12 percent, and the company ran its existing asset base well. Management also affirmed it would add CAD1.8 billion in energy infrastructure projects by the end of the 2012.

That includes the acquisition of SEMCO Holdings, expected to close at the end of this month. Those additions will spur further cash flow growth, which in turn enhances ability to pay higher dividends and fund even more expansion.

Finally, the company was able to fund its moves without levering its balance sheet and has no debt maturities until after 2013.

AltaGas’ flat share price performance this year reflects little of that good news, mainly because the stock had run up in previous years. But it certainly justifies my buy target of USD32 for those who don’t already own it.

Artis REIT (TSX: AX-U, OTC: ARESF) enjoyed a 7 percent increase in its funds from operations per unit, the account from which the diversified property owner pays distributions. The payout ratio based on funds from operations was 87 percent, which may or may not provide room for a dividend increase now.

But the company continued to find ways to increase its earning power and geographic diversification, adding six properties in Alberta, British Columbia and Arizona in the second quarter.

Property occupancy was strong at 96 percent including committed space.

As for debt, the company cut its mortgage debt-to-gross book value ratio to 49.2 percent from 50.7 percent at the beginning of the year. And it has no debt maturities through 2013 as well.

The units have fared very well in 2012 and now trade above my buy target of USD16. That remains my preferred entry point until we see a distribution increase. Artis REIT is a buy below USD16.

Atlantic Power Corp’s (TSX: ATP, NYSE: AT) second quarter is seasonally weak. That was reflected in the quarterly payout ratio of 249 percent, though the more representative six-month tally was well in line with expectations at 89 percent.

The six-month figure is a huge improvement from the 111 percent a year ago and reflects performance of the assets added in the Capital Power deal.

Management has promised a future of steady dividends for shareholders and payout boosts as new assets join the portfolio.

The completion of the Canadian Hills wind farm in Oklahoma–under 20-year contract with OGE Energy Corp (NYSE: OGE)–is on track to begin boosting cash flows in the first quarter of 2012.

And the addition of a new CFO likely signals more accretive expansion ahead.

The company does have some dependence on capital markets in the near term, as it permanently finances Canadian Hills. But there are no debt maturities between now and the end of 2013, and management has proven adept in the past navigating volatile conditions.

Atlantic surged early in the year, dipped and is now up a couple percentage points since Jan. 1. It’s still a buy up to USD16.

Bird Construction Inc (TSX: BDT, OTC: BIRDF) continued to show the benefits of its recent merger with HJ O’Connell.

Net income was three times last year’s tally on a 78 percent jump in revenue, and the dividend payout ratio was a modest 75 percent. That should support management’s recent pattern of annual dividend increases.

Meanwhile, the construction company continues to add new orders, both in the private and public sector. Backlog now sits at a company record CAD1.359 billion, up from CAD1.2356 billion at the beginning of 2012.

Debt is not something investors ever have to worry about with Bird, as the company also maintains cash reserves as surety for its contracts. And with Canada’s energy patch investment picking up steam (see In Focus), there’s little standing in the way of rapid growth with new orders going forward.

Bird stock has been somewhat volatile this year but remains below my buy target of USD14.50 despite a 30 percent return. Buy Bird Construction under USD14.50 if you haven’t yet.

Brookfield Renewable Energy Partners LP’s (TSX: BEP-U, OTC: BRPFF) hydropower output, revenue and bottom line were hit by dry conditions across much of North America. Funds from operations per unit slipped 45 percent, and the payout ratio for the quarter expanded to 104.5 percent.

Fortunately, the six-month payout ratio remained a very supportive 69 percent, even as the company continued to expand its portfolio globally. It’s these asset additions that will power Brookfield Renewable’s dividend and share price higher over time.

Meanwhile, the company’s financial position remains solidly underpinned by Brookfield Asset Management Inc (TSX: BAM/A, NYSE: BAM), which should help the company get an even better interest rate this fall when it rolls over CAD280 million currently drawn on a CAD300 million credit line.

The problem with Brookfield Renewable right now is price, as investors bid the stock up sharply following the earnings release. It’s now up about 20 percent for the year. I advise waiting for a pullback to my target of USD27 or a dividend increase to justify a higher price level.

Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF) has at long last increased its monthly distribution, raising it 3.7 percent to a new annualized rate of CAD1.12 per unit. That boost was more than backed up by solid gains in revenue and margins, as management successfully added high-quality residential properties in key markets.

The payout ratio came in at 78.8 percent, a bit over 80 percent including the dividend boost.

Apartment REITs in Canada are currently being helped by a combination of rising property prices, higher mortgage rates and efforts by Finance Minister Jim Flaherty to cool what he calls property speculation.

But with no mortgage tax deduction and much higher lending standards, Canada is much more a country of renters than buyers. And this REIT continues to take advantage, acquiring 5,594 residential suites in the first six months of 2012. These additions will power future growth.

Meanwhile, debt remains under control with no near-term maturities. I’m raising my buy target on Canadian Apartment to USD24 for those who don’t already own it.

Cineplex Inc (TSX: CGX, OTC: CPXGF) suffered from lower theater attendance from year-earlier levels, as movie fare proved less than exciting. That should change in coming months, as customers flock to releases such as The Dark Knight Rises.

But even with attendance down, the company still managed a 2 percent jump in revenue and record net income and cash flow. The payout ratio based on free cash flow was only 70.1 percent, leaving plenty of room for further dividend growth.

Cineplex’ secret remains its ability to get more out of moviegoers with advanced services rather than just relying on filling seats. That includes upgrades to IMAX and 3D technology offering a range of value-added products and adding new theaters across the country.

These results demonstrate the company is still beating the competition with a lot of room to run.

Minimal debt and near-term maturities are also pluses for financial flexibility. The stock is up about 20 percent this year and trades above my buy target. But Cineplex would be a solid buy on any dip to USD28 or lower.

Davis + Henderson Income Corp (TSX: DH, OTC: DHIFF) shares got a nice lift after management announced solid second-quarter results.

The apparent decision to postpone a dividend increase was a mild disappointment in my view, given the payout ratio is down to just 56 percent. But it’s well in line with management’s consistent conservatism and likely reflects caution that the company’s banking customers could see a slowdown in mortgage lending.

Shepherding cash has the benefit of putting more pieces in place for future growth, and Davis + Henderson continues to see solid returns in all operating areas.

The company has also enjoyed success with its US expansion, a market that’s likely to provide faster growth going forward.

The company has also been traditionally a low-debt operation, and the lack of near-term debt maturities is a continuing plus.

The share price remains below my buy target despite a respectable 20 percent return this year. Buy up to USD20 if you haven’t yet.

Dundee REIT (TSX: D-U, OTC: DRETF) enjoyed a 12.5 percent boost in its funds from operations per unit, as it successfully absorbed its merger with Whiterock REIT.

Already the largest office REIT in Canada, the company continues to add to its base of productive assets, recently by acquiring a two-thirds interest in Bank of Nova Scotia’s (TSX: BNS, NYSE: BNS) Toronto headquarters building.

Occupancy is a solid 95.6 percent, and rents are 12 percent below market on average. This further ensures financial strength, as does a general lack of near-term debt.

The payout ratio of just 76 percent does open the possibility of a distribution increase later this year.

Management appears to be more focused on getting deals done to increase scale and profitability. Consequently, I don’t expect to see a boost in the near future and won’t raise the buy target of USD10 until there is one.

That said, the shares are up about 25 percent this year, and likely have a bright future ahead of them. Dundee REIT is a buy under USD10.

IBI Group Inc (TSX: IBG, OTC: IBIBF) may have been the target of short sellers in the days leading up to its release of second-quarter results, as a steady slide gave way to a torrid rally Aug. 9 when actual numbers were released.

Be that as it may, the important facts from the numbers are the 89 percent payout ratio–solid dividend coverage though probably not enough to spur an increase–a 7.7 percent boost in revenue from the addition of new business and strong, growing order backlog.

The company also saw some progress bringing down the number of days working capital is tied up, despite the continuing shift to the type of design business that delays receivables.

Cash flow as a percentage of revenue was up 0.5 percentage points sequentially, and free cash flow was also higher than first quarter tallies. Most impressive, IBI continues to add new business with acquisitions that complement its existing operations, including a recently announced merger in the UK.

And debt is a non-factor, given the nature of design work and the lack of near-term maturities.

To be sure, IBI has been the victim of selling momentum and is still down a bit more than 20 percent this year, even after the post-earnings announcement rally.

And judging from the questions I took during an Aug. 9 Canadian Edge chat, many question whether the stock can possibly recover.

The answer is simply that it will so long as the underlying business remains on track. These results say it is, and so do the eight analysts now rating the stock a “buy.”

My buy-under target for IBI Group remains USD15, though I strongly advise against loading up on any one stock, ever.

Innergex Renewable Energy Inc (TSX: INE, OTC: INGXF) came in with a second-quarter payout ratio of 84 percent, impressive given the dry conditions that affected hydropower output in much of North America. The key was continued portfolio growth and favorable contracts, particularly at wind plants. Electricity production was 93 percent of the long-term average, against 92 percent last year.

Innergex management continues to focus on building out its portfolio of hydro and wind projects, and there are several major projects set to come on stream over the next couple of years.

Low natural gas prices pose a potential challenge. But thus far at least, the company has been able to win new contracts as environmental mandates have remained favorable. A focus on capital spending means dividend growth is likely to be postponed.

That, in turn, is going to keep me conservative on a buy price for Innergex, which is up about 12 percent this year. But any dip to USD10 or lower would be a great entry point. And when there is a boost, I’ll be raising my target.

Just Energy Group Inc (TSX: JE, NYSE: JE) management answered its critics last month by assuring cash flow and distribution guidance was very much intact. This week the company provided numbers to back that up.

Gross margin–revenue less cost of energy sold–rose 21 percent, while cash flow surged 13 percent. Net customer additions surged 143 percent ahead of last year, proving once again the company is able to add new business despite low natural gas and electricity prices.

Gross margin per share is up 19 percent, while adjusted cash flow was up 11 percent. The payout ratio based on adjusted cash flow was 105 percent for the quarter, which is the company’s weakest seasonally. That was lower than the 116 percent recorded last year, and it sets the company right on track to meet guidance for growth and distributions, just as it said last month.

There’s no doubt in my mind that not every skeptic will be won over by these numbers. More important, however, they signal the company is on track to grow and pay big dividends. And so long as that’s the case the stock will eventually rebound. My buy-under target remains USD16 for those who don’t already own Just Energy.

Keyera Corp (TSX: KEY, OTC: KEYUF) showed once again why it can keep growing even when commodity markets are in disarray. The key is the vast majority of cash flow comes from assets that produce fee-based income.

Natural gas liquids (NGLs) infrastructure operating margin exceeded last quarter’s record with a 72 percent gain over the past year, despite what were substantial declines in NGLs prices.

Gathering and processing, meanwhile, saw 7 percent higher operation margin, also posting a new record. That was offset somewhat by a 47 percent drop in Keyera’s marketing margin.

But the overall result was distributable cash flow of CAD0.78 per share, up 56 percent from year-earlier levels. That produced a payout ratio of just 65 percent, down from 96 percent a year ago.

The distributable cash flow results coupled with continued progress on fee-based asset expansion are a good sign for future dividend growth.

The company plans between CAD125 million and CAD175 million in growth capital spending excluding acquisitions for 2012, with much of it coming in the second half.

For several years Keyera has been a Portfolio leader. That’s changed this year. But after trading well below my buy target of USD42 for several months, the stock is back in the mid-40s and basically breakeven for the year. My view is new investors should hold off purchasing for now. I may raise my buy target later this year, depending on what management does with the dividend.

Pembina Pipeline Corp’s (TSX: PPL, NYSE: PBA) big question coming into this earnings reporting season was how much it would be hurt by exposure to natural gas liquids (NGLs) prices inherited up from the Provident Energy Ltd merger.

The company’s fee-based businesses in gas processing, conventional pipelines and oil sands transportation performed well as expected, thanks to the steady pace of asset additions. Falling NGLs prices, however, did have an impact, particularly weakness in propane.

Coupled with merger costs, that pushed adjusted cash flow from operating activities down to CAD0.31, well below last year’s CAD0.49.

The good news is Pembina has now mitigated its commodity price risk with hedging, even as it continues to successfully expand all aspects of its energy infrastructure assets. Management states it “anticipates cash flow from operating activities will be more than sufficient to meet its short-term operating obligations and fund its targeted dividend level.”

And it continues to have no problems funding its growth projects or accessing capital markets. There are no short-term debt maturities.

The upshot is second-quarter earnings and the 132 percent payout ratio will almost certainly prove to be an anomaly. Meanwhile, the six-month payout ratio is considerably more modest at 78 percent. The stock is off about 5 percent this year, but I expect a much better second half.

My buy-under target remains USD30 for those who don’t already own Pembina Pipeline.

TransForce Inc’s (TSX: TFI, OTC: TFIFF) second-quarter revenue surged 25 percent, pushing up cash flow by 39 percent and adjusted net income by 45 percent. The payout ratio fell to just 35 percent, a level conducive to both future boosts and funding growth.

The really impressive thing about what this trucking and logistics company has done is that overall market conditions have been tepid at best in North America. Instead, management has been forced to find its profits where it can by boosting efficiencies and targeting selected acquisitions.

Ironically, investors seemed to give it little credit for its success until early this year and have since made up for lost time by pushing up the stock nearly 50 percent. Given that kind of buying momentum, I’m very hesitant about pushing up my buy target on this stock much past USD17, at least until there are more dividend increases to justify it.

That certainly seems to be what’s in store, as every one of the company’s business segments improved profitability in the second quarter. Note there are no near-term debt maturities, the result of management’s continued use of conservative financial policies even as it’s pursued its vision of consolidating the still-fragmented trucking and transportation industry.

Aggressive Holdings

Aggressive Holdings are franchises expanding in businesses where profits are affected by ups and downs in the economy, and usually commodity prices. As a result, I’m prepared to accept more volatility in revenue as well as share prices.

Acadian Timber Corp (TSX: ADN, OTC: ACAZF) had another quarter in which cash available for distribution didn’t cover its payout. The difference was that second-quarter results rarely if ever do, and measures of efficiency did increase markedly thanks to management’s cost management.

Cash flow as a percentage of revenue rebounded to 15 percent from 5 percent last year. Meanwhile, net sales rose 22 percent, and the company benefitted from better conditions in the spruce fir sawlogs and hardwood pulp market. Cash flow more than tripled to CAD2.2 million.

Second-quarter and six-month payout ratios were 175 percent and 111 percent, respectively, and are expected to decline in the second half of the year, as market conditions improve and efficiency measures have more time to work.

To be sure, selling timber and forest products is a volatile business. One reason I’ve been attracted to Acadian, however, is the firm financial backing of 45 percent owner and manager Brookfield Asset Management Inc (TSX: BAM/A, NYSE: BAM). Brookfield Asset Management is both patient and deep-pocketed, key to sustaining a dividend in this kind of business.

That’s why Acadian has been able to return nearly 30 percent this year. My buy-under target for the stock remains USD13.

ARC Resources Ltd (TSX: ARX, OTC: AETUF) had another very strong quarter in the field, ramping up output to 93,997 barrels of oil equivalent per day. Liquids production surged 19 percent, spurring an overall output gain of 14 percent.

Operating costs remained low at just CAD9.48 per barrel of oil equivalent as well. Not even that could offset a near halving of realized selling prices for natural gas (62 percent of output) and a nearly USD20 drop in realized selling prices for the company’s crude oil.

Funds from operations slid 21 percent to CAD0.57 per share. On the other hand, that was still good enough to comfortably cover the dividend with a payout ratio of 53 percent.

Meanwhile, the company continued to make progress on new shale development efforts, particularly in liquids.

ARC’s large output of natural gas and access to long-life, low-cost reserves make it a natural beneficiary whenever gas prices rebound again. What makes the stock attractive, however, is it also has assets in place to weather gas prices’ slump and to take advantage of rivals’ weakness.

No one should ever own a dividend-paying energy stock without taking into account what can happen if oil prices really plunge from here. But ARC is about as high-percentage a bet as you can find in this sector. And it would make a nice takeover bet as well.

The stock is back to flat this year, largely because investors have started thinking about what price it might fetch. Whatever it is, it should be comfortably above my buy target of USD26.

Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF) continued to reap the fruits of its acquisition of Marsulex in June 2011, as second-quarter revenues from its signature sulfuric acid business moved up 16.5 percent.

The market for the company’s chemicals is heavily industrial and therefore sensitive to global economic growth. Management has protected cash flows and the distribution by safely guarding its niche, boosting efficiencies and maintaining extremely cautious financial policies.

Now, despite a payout ratio of 52 percent the past two quarters, it seems more interested in making incremental capital expenditures and improving the balance sheet than raising its payout. That may change at some point, should profits continue to head higher.

Meanwhile, there are no near-term debt maturities, and cash flow is covering most or all of capital spending.

The stock has returned nearly 20 percent this year but currently trades above my target of USD15.50. I won’t raise that level until there is a dividend increase. But any dip below that is a good entry point for anyone who doesn’t own it.

Colabor Group Inc (TSX: GCL, OTC: COLFF) came in with good numbers, as I reported in a Jul. 20 Flash Alert. The most important figure was a 0.8 percent increase in comparable sales, which exclude acquisitions and therefore give a true picture of whether or not the company is holding its own.

This is the second quarter of better comparable sales since this year’s dividend cut, a very good sign management’s efficiency steps are working. There’s still hard work to do replacing the loss of a major contract in Ontario. But the company also reported it has both renewed other major customers and secured new business.

Cash flow per share was up 3.8 percent, producing a payout ratio of just 55 percent. And management also made progress boosting the balance sheet; there are no maturities before 2016, and debt-to-cash flow is back to 3.11-to-1 (3.5-to-1 is the limit under bank covenants).

I’m not expecting a dividend increase at Colabor, and it may be some time before the stock recovers its nearly 20 percent drop this year. But this is a second consecutive quarter of results showing the company has turned the corner. My buy-under target remains USD8, and the stock is off the Dividend Watch List as well.

Crescent Point Energy Corp (TSX: CPG, OTC: CSCTF) posted easily the biggest positive second-quarter earnings surprise in the CE Portfolio, thanks to a 47 percent surge in average daily production from year-earlier levels. That’s in parts due to the company’s drilling skill (100 percent success rate) and its ability to repeatedly purchase high-quality assets at bargain prices.

Management also increased the 2012 exit production rate by 2.5 percent to more than 100,000 barrels of oil equivalent per day.

The upshot: Despite a drop in realized selling price for oil to just CAD70 a barrel in the second quarter, cash flow per share still rose to CAD1.19, up 4 percent from last year’s level.

Better, there’s every reason to expect better pricing in the second half of 2012, even as production ramps up even more. The best news for anyone who doesn’t yet own Crescent Point is the stock is basically flat for the year and still trades well under my buy target of USD48. Buy now if you haven’t yet.

Extendicare Inc (TSX: EXE, OTC: EXETF) continues to manage its way through cuts in Medicare reimbursement at its senior care centers in the US.

Second-quarter revenue was 1.3 percent lower than year-earlier levels. Cash flow as a percentage of revenue slipped to 9.4 percent excluding a reserve adjustment, down from 12.2 percent a year ago and 9.5 percent in the first quarter.

And, finally, adjusted funds from operations–the key measure of profitability from which dividends are paid–fell 27 percent, bringing the second-quarter payout ratio up to 91 percent. The six-month payout ratio, a better gauge of sustainability, came in at 76 percent.

These numbers were in the face of an 11.8 percent drop in Medicare Part A average daily revenue rates and a 2.4 percent drop in Managed Care rates. The company also exited the state of Kentucky due to what CEO Tim Lukenda called a “heightened litigation environment.”

Offsetting that were the company’s relentless efforts to cut costs and debt, which are now largely complete. It also got some good news from Medicare in another rate boost, though that could be rolled back if Congress fails to reach a deal on the budget following the November elections.

Canadian operations’ cash flow, which represents 39 percent of the total, grew 9.6 percent over the past year.

For all of its turmoil, Extendicare stock is still basically flat for the year. That’s remarkable, but I fully expect to see better things ahead, as investors get more comfortable with the current level of earnings as regards dividends. My buy-under target for aggressive investors remains USD9. The stock is also off the Dividend Watch List for now.

Newalta Corp’s (TSX: NAL, OTC: NWLTF) second-quarter revenue moved ahead by 4 percent, as the growth of its fee-based services offset lower selling prices for the byproducts of its cleanup processes.

Funds from operations did take a hit of 19 percent but still covered the distribution by nearly a 4-to-1 margin. That should leave the door open to more dividend growth in coming months, particularly in light of management’s upbeat second-half forecast and the 122 percent jump in capital expenditures for new earning assets.

I’ve held this stock for many years and through some severe ups and downs, mainly because management always showed it was building its national franchise. The stock is up about 12 percent this year but still trades well below my buy target of USD15. Given that this is a much larger and more powerful company, now is a much better time to buy than when I initially recommended it in 2005. Newalta is a buy under USD15.

Noranda Income Fund (TSX: NIF-U, OTC: NNDIF) stock is a bet dissident shareholders will win their argument that a higher dividend is appropriate. That hasn’t happened since my December 2011 recommendation. But first-quarter earnings and now second-quarter results have seen solid improvement in profitability as well as balance sheet strengthening. And the payout ratio of 64 percent of what amounts to distributable cash flow is modest.

The zinc refining facility from which Noranda receives all of its royalty cash flow is more needed than ever and is enjoying a recovery along with US heavy industry. That makes it highly unlikely it will be shut down when the zinc supply contract with majority owner Xstrata Plc (London: XTA, OTC: XSRAF) expires.

And so long as that doesn’t happen, it’s only a matter of time before a huge dividend increase can be easily absorbed, possibly a double to the level at the initial public offering.

This one is not for the impatient or faint of heart. But Noranda is a solid speculation up to USD6.

Parkland Fuel Corp (TSX: PKI, OTC: PKIUF) posted record cash flow for the three months ending Jun. 30 on a 9 percent boost in fuel volume. Distributable cash flow exploded upward by 147 percent and the dividend payout ratio plunged to just 44 percent. Retail fuel volumes rose 22 percent thanks to a combination of successful acquisitions and organic growth.

Meanwhile, management’s long-running cost-cutting efforts at last shone through with a 35 percent year-over-year drop in net unit operating costs as well as an 11 percent cut in days outstanding for sales receivables.

All this was achieved despite a wet spring, volatile commodity prices and an early break-up season that disrupted logistics.

Return on capital employed surged to 20.1 percent, more than double last year’s 9.2 percent.

There was no indication management plans to increase dividends this year. These results and the company’s continued expansion as it adds scale in the still fragmented fuels marketing business, however, make one seem inevitable.

So are further gains for the stock, which is up nearly 30 percent this year. Until we see a dividend increase, however, I’m not inclined to chase this one higher. My buy target remains USD13.

PetroBakken Energy Ltd (TSX: PBN, OTC: PBKEF) wasn’t as successful as Crescent Point in boosting second-quarter profits in the face of steeply falling energy prices. But the oil-weighted producer did lift second-quarter production by 10 percent, cutting expenses and staying on track to meet management’s full-year operating guidance.

The payout ratio came in at just 37 percent, or 18 percent on a cash basis including the dividend reinvestment plan. The company also maintained CAD1.1 billion in undrawn credit with which to fund development efforts and has no near-term debt maturities. Results at the Bakken, Cardium and southeast Saskatchewan operations were robust, with the bulk of CAD875 million in planned capital spending for 2012 still ahead.

Expanding production and reserves are the keys to building value with any energy producer company.

With 20-20 hindsight, this stock would have been much better to enter after the May drop in oil prices.

As it is, I’m willing to sit with the red ink in expectations that rising output will eventually catapult this stock much higher, even as the company continues to pay a generous dividend.

My buy target remains USD18, a level I’m comfortable will be achieved in the next 12 to 18 months as output rises and oil prices get stronger.

Peyto Exploration & Development Corp (TSX: PEY, OTC: PEYUF) also set records in the second quarter of 2012.

Production per share grew for an 11th consecutive reporting period, rising 15 percent even as cash costs fell to a record of less than CAD1 per thousand cubic feet.

Not even that level of efficiency could prevent funds from operations falling 19 percent, due to a 30 percent drop in realized selling prices for oil and gas.

But the payout ratio was still a modest 39 percent, leaving plenty of cash to fund growth and keep the balance sheet strong.

The acquisition of Open Range Energy Corp (TSX: ONR, OTC: ONRRF) should provide plenty of the former, as the first “significant” acquisition of a company in Peyto’s 13-year history.

Earnings would explode higher if North American natural gas prices recovered back toward a level more in line with world prices. These results, however, prove once again that the company can prosper even if that doesn’t happen. Buy on dips to USD20 or lower.

PHX Energy Services Corp (TSX: PHX, OTC: PHXHF) is now the highest-yielding energy services firm I track in How They Rate. That’s the result of a prolonged slide this year, as investors have worried about its aggressive expansion plans and a possible slowdown in directional drilling should oil prices drop.

Second-quarter results were something of a mixed bag. Revenue was strong, rising 29 percent to a record thanks to rapid expansion of international operations (17 percent of sales). Cash flow, however, skidded 51 percent, as an extended winter breakup in Canada hurt profits there and the company absorbed more costs from foreign expansion.

The company’s second-quarter payout ratio ballooned to 200 percent, though the six-month ratio was a more representative 65 percent.

There were definite bright spots. One is the fact that greater reliance on operations outside North America insulates earnings from the impact of weather and energy price swings on drilling activity.

Demand for horizontal drilling rigs and the company’s rental and usage rates are robust.

And management has gotten serious about attacking costs, such as third-party equipment rentals in markets where the company is expanding rapidly.

Debt is modest with no near-term maturities.

The key here is likely to be the dividend. If it holds, I expect a big rebound in the stock. Buy up to USD14.