Six Canadian Edge Portfolio companies have reported results since the May issue of Canadian Edge went to press on Friday. I highlight their results and prospects below.

Takeaway No. 1 is all six companies came in with results that supported current dividends as well as future dividend growth. Takeaway No. 2 is the results also supported long-term plans for growth and healthy balance sheets.

If there is a negative, it’s that some of these stocks don’t currently trade below my target buy prices. I strongly urge investors not to pay more than those targets, particularly in a market riven by so many events that have nothing to do with our recommendations’ performance as companies.

It almost certainly won’t be a problem, for example, to pick up shares of Parkland Fuel Corp (TSX: PKI, OTC: PKIUF) below my target of USD13 if there’s a real correction in the overall market, even if it lasts just a couple days. Remember, this is a momentum-driven market and prices can change in a hurry, even if there’s absolutely no hard news or that news is favorable.

Atlantic Power Corp’s (TSX: ATP, NYSE: AT) results were largely free of surprises but full of evidence the company’s growth plans are working. That’s impressive, given the uncertain environment for wholesale power and natural gas prices and the fact that the company has only recently completed an acquisition that more than doubled its size and transformed its entire operation.

Atlantic’s project cash flows rose 158 percent in the quarter from last year’s tally. That was largely due to the acquisition of Capital Power LP’s 18 operating projects in a deal completed last year. Aggregate power generation in megawatt hours increased 138 percent.

These numbers also reflect solid performance at previously owned assets and the company’s continuing success hedging the impact of commodity price swings. Performance of the company’s largely natural gas, wind and hydro fleet increased by 2.7 percentage points over the prior year to 96.3 percent.

Cash available for distribution also moved to a new record, surging by CAD43.2 million over the prior period despite mild weather. This was in part also due the company’s reduction of its combined foreign currency forward positions due to the acquisition.

The payout ratio for the quarter fell to just 55 percent versus 141 percent of distributable cash flow last year.

Management expects this figure to fluctuate with the seasons, in part because of factors such as semiannual interest payments on the CAD460 million in senior notes issued last year that pay interest in the second and fourth quarters. Guidance is still for a full-year payout ratio of 92 percent to 97 percent based on the newly raised dividend rate.

Management can forecast that well because cash flows don’t depend on the spot market for wholesale power but rather a combination of long-term contracts with utilities, government entities and investment-grade industrial companies.

Atlantic has also reached a settlement for three-year customer rates for its Path 15 power line, which has now been filed with the Federal Energy Regulatory Commission for approval. A ruling is expected by the end of June, which will eliminate uncertainty. This operation, howeverm isn’t nearly as important to overall cash flow in the wake of the Capital Power deal.

CEO and founder Barry Welch expects to continue growing cash flow with targeted opportunities to buy operating and late-stage development projects and locking in sales under long-term contracts. That includes the Canadian Hills wind plant, which will bring 300 megawatts of capacity under a 20-year contract with OG&E (NYSE: OGE) in Oklahoma.

That’s expected to generate an additional CAD16 million to CAD19 million in cash distributions each full year through 2020 and higher disbursements thereafter. It will also offset what is now expected to be lower cash flow from a trio of gas-fired power plants in Florida, where contracts are up for renewal.

Atlantic has announced it will permanently finance Canadian Hills by issuing up to CAD125 million shares, a move that’s likely to convince at least some investors to sell. Bay Street opinion is neutral to bearish, with one “buy” rating versus three “holds” and three “sells,” though insiders are net buyers having increased holdings 23.3 percent the last six months according to Bloomberg Investment Service.

These results demonstrate that any worries about Atlantic’s dividends are misguided and mostly based on a misunderstanding of the company’s profitability. And that means opportunity for anyone who doesn’t already own Atlantic Power to buy in up to my longstanding target of USD16.

Brookfield Renewable Energy Partners LP (TSX: BEP-U, OTC: BRPFF) posted a 45.6 percent jump in its funds from operations per unit to CAD0.67. This impressive increase was fueled by a 22.8 percent jump in generation, which pushed up revenue by 31.1 percent.

The revenue gains were primarily driven by project expansion as well as hydro generating conditions that were 6 percent more favorable than the long-term average.

Wind conditions were also better than expected and benefitted from additional capacity in Canada and the US. Wind is locked up under long-term contracts that aren’t affected by falling wholesale power prices in the US, which have been triggered by the drop in natural gas prices.

Importantly, Brookfield Renewable also increased its net asset value to CAD32.86 per partnership unit. That’s about 18.8 percent above the current price of the units and affirms that rapid expansion of assets–the LP has added 550 megawatts in recent months–is already accretive to unitholder value. Management continues to pursue a range of expansion opportunities, which include 48 megawatts of new hydro in Brazil, 45 megawatts of new hydro in Canada and wind in California, where utilities must generate or buy 33 percent of output from renewable sources by 2020.

Management’s goal with the dividend is to maintain a 60 percent to 70 percent annual payout ratio while growing the dividend 3 percent to 5 percent a year. That’s a favorable formula, though it may or may not include regular quarterly increases. The first-quarter payout ratio was only 51.5 percent, low enough to invite an increase from the current level, though management is likely to focus it on long-term hydro and wind conditions, which fluctuate throughout the year.

The stock is on track now to be listed on the New York Stock Exchange (NYSE) in the second half of 2012, according to a statement made by CEO Richard Legault during the company’s first-quarter conference call. Listing on the NYSE will increase the interest in Brookfield Renewable and probably the share price. My buy target for the stock remains USD28.

Dundee REIT (TSX: D-U, OTC: DRETF) posted a 17 percent jump in first-quarter funds from operations over last year’s level, 1 percent over fourth-quarter 2011 results. This included an impressive 2.6 percent increase in net operating income from properties owned for more than a year, a clear sign of solid management.

Occupancy remained strong at 95.6 percent, even after CAD1.6 billion in accretive acquisitions over the past year.

Investment property revenue rose 64.9 percent for the quarter over last year and is set to grow even more as the newly acquired Whiterock REIT assets start to produce. Overall net operating income was up 63 percent, as the company also enjoyed higher rents and efficiencies.

The company is now the largest office REIT in Canada and the fourth-largest REIT overall up north, which should mean better scale and access to capital to fuel further growth as well.

Dundee’s payout ratio based on funds from operations fell to just 74.3 percent from 87.3 percent a year ago. The payout ratio based on adjusted funds from operations–which factors out certain items–went down to just 87.3 percent from 100 percent a year ago. Both figures include a 64.6 percent increase in outstanding units used to fund acquisitions such as Whiterock.

Dundee’s in-place office rents are now 12 percent below estimated market rents portfolio wide. Industrial rents, meanwhile, are 4 percent below, even as market rents continued to rise in all major operating areas. This includes previously slumping Calgary, which actually saw a sixth consecutive quarter of higher rents with a 12 percent annualized gain.

As for debt, Dundee has cut its average effective interest rate to 4.58 percent from 4.96 percent at the end of December 2011. Debt is up to 51.8 percent of book value from 49 percent, largely due to the Whiterock acquisition. But interest coverage actually improved to 2.7-to-1 from 2.6-to-1. Average maturity is 4.5 years versus 5.2 years, reflecting the impact of the acquisition but still well within covenants.

CEO Michael J. Cooper noted during Dundee’s conference call that the company intends to grow cash flow with “improved occupancy, increased rents and lower interest rates” for the rest of the year. There’s also some potential for redevelopment of existing properties, “culling the portfolio” with selected selling opportunities and targeted acquisitions, though in Cooper’s words “not as much” as in previous years.

On the question of distribution growth, Mr. Cooper answered a question during the call by essentially saying Dundee should post its expected growth numbers for 2012 “before we raise it.” For that reason, I’m not raising the buy target on Dundee at this time. However, the REIT would be a solid buy on a dip to USD36, a level it only broke above last month.

Parkland Fuel Corp (TSX: PKI, OTC: PKIUF) increased fuel volumes by 4 percent, with a 22 percent increase in retail business offsetting a 13 percent decline in commercial throughput. Cash flow hit a first-quarter record, rising 2 percent excluding a CAD4.3 million put option investment to protect supply margins and despite an estimated CAD5 million impact from unusually mild winter weather.

Management also made progress on long-term cost-cutting objectives, shaving 8 percent from operating costs per unit sold. And it cut days outstanding for receivables by 6 percent, to 25.9 days from 27.5 days a year ago. The company also slashed financing costs by 38 percent and has no near-term debt maturities. A CAD450 million credit line maturing in June 2014 is now less than half drawn.

During Parkland’s first-quarter conference call CEO Bob Espey reiterated his plan to grow the fuel marketing business to at least 7 billion liters of throughput. The company’s long-run progress to meet this objective was advanced by the addition of several major new accounts during the quarter, and Mr. Espey affirmed “all our organic growth in on target from our new sales perspective.”

Parkland’s other long-term challenge is to replace the benefits from the Suncor Energy Inc (TSX: SU, NYSE: SU) supply contract, which expires at the end of 2013. Mr. Espey affirmed company initiatives are “on track” to achieve that goal, as the company maximizes the value of its supply operations and invests in its terminals. The Bowden Terminal is on track to be operational at the end of 2012. The company also remains in the game for acquisitions, with CAD0.5 million approximately targeted for new assets.

Distributable cash flow was lower in the first quarter, pushing the payout ratio to 62 percent from 43 percent in 2011. This still exceeded capital needs and dividends by CAD10 million in the quarter and CAD58 million for the 12 months, providing cash for growth and debt reduction. Mr. Espey cautioned investors not to expect dividend increases but also advised “not to expect reductions, as we execute our growth strategy.”

Parkland’s cash position is further enhanced by the fact that 70 percent of its investors belong to its dividend reinvestment plan. This, Mr. Espey noted, is “a low-cost avenue to raise equity for our growth and acquisition plans.” Unfortunately, it’s basically off limits to US investors. But the ability to raise low-cost capital will benefit all investors in the company.

These results demonstrate Parkland has been unaffected by the crash in North American gas prices and is far less affected by mild weather than in the past as well. That’s not enough to merit a move from the Aggressive Holdings to the Conservative Holdings. Nor am I raising my buy target just now.

But Parkland continues to execute its plan to grow by consolidating what’s to date been a highly fragmented industry. And that certainly makes it worth holding. Parkland Fuel is a buy on dips to USD13 or lower if you don’t yet own it.

Pembina Pipeline Corp (TSX: PPL, NYSE: PBA) enjoyed volume growth of 15 percent in its system, taking advantage of surging demand for oil and natural gas liquids. Adjusted cash flow from operating activities–the company’s primary measure of profitability for paying dividends–rose to CAD0.59 per share for the quarter, up 31.1 percent from last year. That pushed the payout ratio down to 68.6 percent, including the recent increase to a new monthly rate of CAD0.135.

Gas services saw a 27 percent jump in revenue, thanks to an increase in processing volumes at the recently expanded Cutbank Complex. Midstream & Marketing business revenue net of product purchases rose 24 percent on higher volumes and activity at the Peace Pipeline and Drayton Valley Pipeline systems. And Conventional Pipeline systems generated 19 percent higher revenue.

Finally, Oil Sands and Heavy Oil–which operates to a large extent on capacity contracts–enjoyed a 56 percent jump in operating margins on the addition of the Nipisi and Mitsue pipelines.

Pembina’s first-quarter results don’t Provident Energy Ltd, with which it merged at the beginning of the current quarter. But the new assets also performed well despite softer propane pricing due mostly to the mild winter. Adjusted funds from operations were flat versus year-earlier levels.

The Provident assets promise to increase their profitability as they’re combined with Pembina’s existing operations.

As indicated when this merger was first announced, Pembina is now considerably more dependent on natural gas liquids than before and is consequently at risk to volatile commodity prices. This it can hedge to some extent.

CEO Bob Michaeleski cited CAD4 billion in “unrisked capital opportunities” to drive the company’s fee-based asset growth, not counting possible investment in liquefied natural gas exports. This includes CAD700 million still budgeted for this year, which management can accelerate or delay depending on market conditions.

Broken down, these are CAD1.5 billion in oil sands investment, CAD1 billion in gas fractionating, CAD500 million to CD700 million in “conventional” pipes and the rest in midstream and marketing, particularly development of what Mr. Michaeleski called “full service terminals.”

Taken together, that adds up to solid growth in cash flows, distributions and, eventually, the unit price over time.

I’m raising my buy target on Pembina Pipeline to USD30 to reflect its budding prospects, though only for those who don’t already own the stock.

Vermilion Energy Inc (TSX: VET, OTC: VEMTF) boosted first-quarter funds from operations to CAD1.56 per share, a 34.5 percent jump from year-earlier levels and a 6.9 percent increase from its fourth-quarter tally. The keys were rising production, which was up 15 percent year-over-year and 7 percent from the prior quarter, and the fact that the vast majority of sales are priced to global oil prices, particularly Brent crude, which accounted for 44 percent of output brought to market.

Heavy exposure to Brent has all but immunized Vermilion against the crash in North American gas prices. Management has basically maintained its long-term strategy for capital spending and dividends, which it intends to increase following the first production of gas from the Corrib project off the coast of Ireland. This project is on track for startup in late 2014.

Other key areas of development for Vermilion include the Cardium light oil play in Western Canada; six recently acquired producing fields in the Paris and Acquitane Basins in France; and extensive holdings in Australia, which enjoy Asian market pricing.

Breaking it down, Cardium-driven Canadian output rose 29 percent, while Netherlands output was up by 17 percent. Production in Australia, France and Ireland, meanwhile, was stable but with high netbacks and large free cash flows.

Average selling price for natural gas was nearly twice that of other Canadian producers at CAD5.77 per thousand cubic feet (roughly equal to a million British thermal units). Average selling price for crude oil, meanwhile, came in at CAD113.99. These are numbers that should hold up in the coming year, as management maintains conservative financial and operating strategies and enjoys its global pricing.

Recent results earned it an upgrade to buy at National Bank, putting the analyst count at nine “buys,” four “holds” and one “sell.” And insiders remain net buyers as well.

Vermilion Energy continues to trade below my buy target of USD50 for those who don’t already own it. Note that Vermilion traded under USD40 in early October 2011, the last time worries about global debt peaked.

Here are when Canadian Edge Portfolio Holdings have reported or will report numbers. Note that several still have not set firm dates; we have provided an “estimate” for these companies based on their respective reporting histories.

Conservative Holdings

• AltaGas Ltd (TSX: ALA, OTC: ATGFF)–Apr. 26 Flash Alert
• Artis REIT (TSX: AX-U, OTC: ARESF)–May 9 (confirmed)
• Atlantic Power Corp (TSX: ATP, NYSE: AT)–May 8 Flash Alert
• Bird Construction Inc (TSX: BDT, OTC: BIRDF)–Jun. 1 (estimate)
• Brookfield Renewable Energy Partners LP (TSX: BEP-U, OTC: BRPUF)–May 8 Flash Alert
• Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF)–May 9 (confirmed)
• Cineplex Inc (TSX: CGX, OTC: CPXGF)–May 10 (confirmed)
• Davis + Henderson Income Corp (TSX: DH, OTC: DHIFF)–May 8 (confirmed)
• Dundee REIT (TSX: D-U, OTC: DRETF)–May 8 Flash Alert
• EnerCare Inc (TSX: ECI, OTC: CSUWF)–May 9 (estimate)
• IBI Group Inc (TSX: IBG, OTC: IBIBF)–May 11 (confirmed)
• Innergex Renewable Energy Inc (TSX: INE, OTC: INGXF)–May 14 (confirmed)
• Just Energy Group Inc (TSX: JE, OTC: JUSTF)–May 18 (estimate)
• Keyera Corp (TSX: KEY, OTC: KEYUF)–May 8 (confirmed)
• Northern Property REIT (TSX: NPR-U, OTC: NPRUF)–May 9 (confirmed)
• Pembina Pipeline Corp (TSX: PPL, OTC: PBNPF)–May 8 Flash Alert
• RioCan REIT (TSX: REI-U, OTC: RIOCF)–May Portfolio Update
• Shaw Communications Inc (TSX: SJR/B, NYSE: SJR)–Apr. 26 Flash Alert
• Student Transportation Inc (TSX: STB, OTC: STUXF)–May 11 (estimate)
• TransForce Inc (TSX: TFI, OTC: TFIFF)–Apr. 26 Flash Alert

Aggressive Holdings

• Acadian Timber Corp (TSX: ADN, OTC: ACAZF)–May High Yield of the Month
  
• Ag Growth International Inc (TSX: AFN, OTC: AGGZF)–May 11 (confirmed)
• ARC Resources Ltd (TSX: ARX, OTC: AETUF)–May Portfolio Update
• Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF)–May 9 (confirmed)
• Colabor Group Inc (TSX: GCL, OTC: COLFF)–May Portfolio Update
• Crescent Point Energy Corp (TSX: CPG, OTC: CSCTF)–May 11 (estimate)
• Extendicare REIT (TSX: EXE-U, OTC: EXETF)–May 8 (confirmed)
• Newalta Corp (TSX: NAL, OTC: NWLTF)–May 8 (confirmed)
• Noranda Income Fund (TSX: NIF-U, OTC: NNDIF)–Jun. 14 (estimate)
• Parkland Fuel Corp (TSX: PKI, OTC: PKIUF)–May 8 Flash Alert
• Pengrowth Energy Corp (TSX: PGF, NYSE: PGH)–May Portfolio Update
• PetroBakken Energy Ltd (TSX: PBN, OTC: PBKEF)–May Portfolio Update
• Peyto Exploration & Development Corp (TSX: PEY, OTC: PEYUF)–May 11 (estimate)
• PHX Energy Services Corp (TSX: PHX, OTC: PHXHF)–May Portfolio Update
• Vermilion Energy Inc (TSX: VET, OTC: VEMTF)–May 8 Flash Alert