Slowly but surely, Canadian Edge Portfolio Holdings are releasing fourth-quarter and full-year 2011 numbers. Just four announced earnings this week, leaving 19 left to report in coming weeks, more than half of the recommendations.

The good news is we’ve yet to see any stumbles. Not every company has blown the doors off, in part because their game is to be steady rather than flashy. But all are covering distributions handily, strengthening balance sheets and setting the stage for strong future growth, even as management lays down plans based on conservative assumptions for their industries and the economy at large.

That’s the formula for strong returns in a year that has started well enough, but where companies continue to face challenges from lumpy economic growth and global deflationary pressures. My strategy remains to hold a diversified mix of stocks backed by strong underlying businesses.

The goal is to minimize the impact of potential blow-ups and at the same time keep us in the game for what should be another good year for solid, dividend-paying stocks.

Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF) posted full-year 2011 distributable cash flow (DCF) per unit of CAD2.01. That was 70.3 percent higher than 2010 DCF on a 57.8 percent jump in revenue and a 60.8 percent increase in cash flow.

Fourth-quarter DCF–a seasonally weak period because of timing of capital costs–was CAD0.29, a 38.1 percent increase from the year-earlier tally, as cash flow rose 131.2 percent. Full-year DCF covered the distribution by a 1.68-to-1 margin, good for a 59.7 percent payout ratio, after maintenance capital expenditures.

The star operation was Sulphur Products & Performance Chemicals (SPPC), which benefitted from last year’s acquisition of the assets of Marsulex. The unit boosted revenue by 82.4 percent and cash flow by 89.1 percent. Higher prices for sulphuric acid–a key element in many industrial processes–were also a key catalyst for higher profits.

The strong performance at the SPPC division more than offset relative weakness at the Pulp Chemicals operation, which saw revenue dip 1.6 percent and cash flow sink 16.2 percent. After the Marsulex deal, SPPC now generates more than 10 times the cash flow of Pulp Chemicals. International operations grew revenue 50.9 percent, thanks to higher prices for sulphur and higher prices and volumes of sulphuric acid sold.

Chemtrade’s strong quarterly and annual results for 2011 left plenty of cash for further capital growth as well as balance-sheet strengthening. The company now has no outstanding debt maturities until 2015.

The business is still quite commodity price-sensitive and therefore vulnerable to economic ups and downs. And as the prior year’s problems at its Beaumont plant attest, it can also be disrupted by outages at key facilities. The greater dependence on sulphuric acid after the Marsulex purchase could wind up making the company even more susceptible to economic events.

This is one big reason why I don’t expect a dividend increase, despite the strong results. Until we do see one, I won’t advise anyone to pay more than my buy-under target of USD15.50 for Chemtrade. But it’s certainly a buy on a dip to that level or lower, where it traded for virtually all of its history up until this year.

Dundee REIT (TSX: D-U, OTC: DRETF) was added to the Canadian Edge Portfolio Conservative Holdings just a few weeks ago, in the February issue, and it’s already rewarded us by posting a 20 percent increase in funds from operations (FFO) per unit in its fourth quarter over year-earlier levels.

FFO was also up 7 percent from the third quarter, as the office property real estate investment trust successfully integrated a string of recent acquisitions. Occupancy was stable at 95.6 percent and stands quite favorably against an industry average of 91.9 percent for office REITs in Canada. Rents on average remained 10 percent below estimated market rents, boding well for rent increases as leases expire.

Dundee also took advantage of record-low corporate borrowing rates to cut the average weighed interest rate on its property mortgages to just 4.96 percent from 5.43 percent a year before. Average term is 5.2 years, limiting exposure to changeable credit market conditions. Debt-to-book value is just 49 percent.

As I pointed out in February’s High Yield of the Month, Dundee is in the middle of its biggest deal yet, the acquisition of rival office property owner Whiterock REIT (TSX: WRK-U, OTC: WRKUF). The CAD1.4 billion deal will add 7.5 million square feet of property in key markets across Canada, improving diversification geographically and by customer.

It’s expected to close on or about Mar. 2, pending a vote by Whiterock holders on Feb. 27.

Note that US investors who hold Whiterock will be cashed out when the merger is consummated. As a result, my advice for US holders of Whiterock is to sell now and buy units of Dundee. That’s mainly to be part of a bigger and stronger enterprise. But it’s also necessary to avoid possible erroneous 15 percent withholding of the proceeds, should your broker’s clearing corporation fail to file adequately.

The payout ratio based on fourth-quarter FFO was just 75.3 percent, 81.8 percent for the full year. Based on adjusted funds from operations (AFFO)–which factors in only operating items–the ratios are still solid at 88.7 percent and 94.4 percent, respectively. Fourth-quarter FFO was 7.4 percent better than year-ago levels, while AFFO was 6.9 percent higher.

All of these numbers are set to improve when the Whiterock deal is finished off. Yielding 6.4 percent and selling for just 1.19 times book value, Dundee REIT remains a buy up to USD35 for anyone who hasn’t already bought it.

EnerCare (TSX: ECI, OTC: CSUWF) came in with another strong quarter, posting an 18 percent jump in revenue and a 7 percent boost in cash flow. Management also announced another dividend increase to a new monthly rate of CAD0.056 per share.

That’s a boost of 1.8 percent and the second this year, putting the current rate 3.7 percent above year-earlier levels.

The latest increase sets a potential precedent for something we’ve yet to see from the former Canadian trusts turned corporations: quarterly payout boosts. In response to a question during the REIT’s fourth-quarter conference call CEO John Macdonald stated there’s been no formal change in policy, but left the door open by noting the board would be looking at “what success we have in terms of further reducing attrition and perhaps offsetting that if sub-metering growth continues to be quite buoyant.”

More important, whether we see regular quarterly dividend increases or not EnerCare’s results certainly would support such a policy, as the waterheater renter/submetering contractor dropped its payout ratio to 55 percent in 2011 from 62 percent in 2010. Distributable cash flow (DCF), the key measure of profitability, was up 18.3 percent from 2010, the second consecutive year of double-digit growth.

Breaking down performance, the company’s submetering business was again the standout, with sales up more than 600 percent from last year. Management continues to take advantage of its leading market position as well as demand for this technology that allows more efficient use of energy.

The company’s rentals business was also more robust than it’s been in quite some time. Attrition in rentals–a major challenge as recently as a year ago–declined by another 10 percent, as marketing initiatives stanched customer defections from this mature business. This trend should improve further this year, as the company starts to operate without restrictive Ontario regulations that have advantaged competitors in recent years. Those regulations expired Feb. 20, 2011, and should show up as five weeks of improved returns in first-quarter results.

EnerCare used its robust cash flows to further reduce debt costs, amortizing a relatively high-cost bridge loan maturing in 2013 and as convertible holders swapped for shares of stock. And the company should be able to cut such costs further in 2012, notably with the refinancing of 6.75 percent senior notes due Apr. 30, 2014. It expects to pay off the remaining 6.2 percent senior notes due Apr. 30, 2012, with cash on hand.

Overall, these results are clear confirmation that EnerCare is back on track and deserving of a higher buy-under target. We’ve made a good chunk of change since adding the stock to the Canadian Edge Portfolio in November 2010. But it looks like there’s a lot more of that to come. I’m raising my buy target to USD10 for those who don’t already own EnerCare.

Enerplus Corp (TSX: ERF, NYSE: ERF) posted a sizeable headline loss in its fourth quarter 2011 of CAD1.66 per share. This was the result of a CAD334 million non-cash impairment charge for Canadian natural gas assets traceable to the sharp drop in the commodity’s price over the past year.

As was the case before Enerplus’ conversion to a corporation last year, however, earnings per share are a meaningless measure of profitability for the oil and gas producer. The key metric remains funds from operations (FFO) per share.

FFO, too, suffered in the fourth quarter from lower gas prices, slipping to CAD0.87 from CAD0.92 a year earlier. It was still good enough to cover the dividend comfortably, with a payout ratio of 62 percent. Meanwhile, cash flow from operating activities–including proceeds from asset sales–was up 70.5 percent, covering the payout by a solid 2.5-to-1 margin.

With this noisy background of falling natural gas prices, the chief bear case against Enerplus has been that it would be unable to execute its aggressive capital spending plan and pay its current monthly dividend of CAD0.18 in 2012. We’ve already seen natural gas-focused NAL Energy (TSX: NAE, OTC: NOIGF) and Perpetual Energy (TSX: PMT, OTC: PMGYF) slash dividends to save cash to help a move to liquids production. And Enerplus’ total “adjusted” payout ratio–capital spending plus dividends–did climb to 284 percent for the quarter and 221 percent for the year.

At this point, management maintains it can continue to pay its current dividend and fund growth with a combination of cash flow, sales of non-strategic assets and additional borrowing under its credit lines. If it can follow through on that, upside potential is considerable.

Enerplus’ reserves in the ground have a value between CAD26.78 and CAD37.13 per share at a discount rate between 5 and 10 percent. That puts the current share price between 65 and 90 cents per dollar of reserves. The company was able to replace 175 percent of its 2011 production with new reserves at the drillbit, i.e. exclusive of acquisitions. Crude oil and liquids output is slated to rise by at least 7,000 barrels in 2012, reaching 50 percent of the planned exit production rate of 88,000 barrels of oil equivalent by end-year.

The 2012 budget is still targeted at CAD800 million, 70 percent on liquids development. This matches guidance management gave a month ago, demonstrating volatile natural gas prices haven’t forced any changes. In fact, if anything the ground is a bit firmer under the company’s feet, as oil and gas liquids prices are now well above the CAD87.56 per barrel realized in the fourth quarter on oil sales and CAD68.32 realized for natural gas liquids.

Actual production in barrel-of-oil-equivalent terms dropped 3.6 percent during the fourth quarter, entirely the result of a 7.6 percent reduction in average daily production of natural gas. That’s a trend likely to reverse in 2012, as growing low cost output at the company’s Marcellus Shale properties replaces more expensive production elsewhere. Meanwhile, rising liquids output will enjoy a higher price, spurring cash flow.

Much of this is coming from the company’s highly successful drilling in the Bakken region. Production at the company’s Fort Berthold properties, for example, rose from 4,000 barrels of oil equivalent per day at the start of 2011 to 9,000 at the end of the year. And it’s on track to grow to 20,000 to 25,000 over the next two to three years, or nearly 30 percent of the company’s total planned 2012 exit rate production.

And crude oil output using waterfloods technology is replacing production and enhancing efficiency at the company’s older wells in the light oil rich Cardium, Ratcliffe and Viking areas.

The overall target is for a 10 percent boost in 2012 production from 2011 levels, with the bulk of gains coming in the last half of the year. The company expects cash flow to rise along with it, based on higher liquids output and current forward commodity prices. Reduced focus on “dry” Canadian gas will further shepherd cash flow and the company has equity investments it may sell as well.

Ultimately, how Enerplus fares in 2012 will depend as much on energy prices as the continued solid execution of its development plan. The good news is management appears to be basing guidance on some fairly conservative assumptions, including for spending, production, financing costs and energy prices.

That gives it a good chance of being able to follow through with growth and maintain the dividend in 2012 without overloading the balance sheet with debt. There are still no significant debt maturities until 2014. The recent successful equity offering does take at least some of the pressure off credit lines. And as the company increases its liquids production this year, it will become progressively less affected by weak natural gas prices.

These are all good reasons for continuing to hold Enerplus, an Aggressive mainstay in the Canadian Edge Portfolio. I’m not going to restore the stock to a buy, however, until either natural gas prices rebound above USD3 per million British thermal units or we see a couple more quarters of rising liquids production.

Numbers to Come

Here’s when to expect the next round of numbers of Canadian Edge Portfolio Holdings as well as links to analyses of companies that have already reported. I’ll  provide analysis of those yet to submit numbers in Flash Alerts over coming weeks as they appear and in the March CE.

I don’t send out Flash Alerts for companies not in the model Portfolio. Rather, I’ll recap those that have reported by Mar. 9 in the regular issue, along with payout ratios, in How They Rate. The rest will be addressed in the April issue.

Conservative Holdings

• AltaGas Ltd (TSX: ALA, OTC: ATGFF)–Mar. 8, 2012 (confirmed)
• Artis REIT (TSX: AX-U, OTC: ARESF)–Mar. 14, 2012 (confirmed)
• Atlantic Power Corp (TSX: ATP, NYSE: AT)–Feb. 29, 2012 (confirmed)
• Bird Construction Inc (TSX: BDT, OTC: BIRDF)–Mar. 2, 2012 (estimate)
• Brookfield Renewable Energy Partners LP (TSX: BEP-U, OTC: BRPUF)–Feb. 15, 2012, Flash Alert
• Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF)–Feb. 28, 2012 (confirmed)
• Cineplex Inc (TSX: CGX, OTC: CPXGF)–Feb. 9, 2012, Flash Alert
• Colabor Inc (TSX: GCL, OTC: COLFF)–Mar. 8, 2012 (estimate)
• Davis + Henderson Income Corp (TSX: DH, OTC: DHIFF)–Mar. 6, 2012 (confirmed)
• Dundee REIT (TSX: D-U, OTC: DRETF)–Feb. 24, 2012, Flash Alert
• EnerCare Inc (TSX: ECI, OTC: CSUWF)–Feb. 24, 2012, Flash Alert
• IBI Group Inc (TSX: IBG, OTC: IBIBF)–Mar. 21, 2012 (estimate)
• Innergex Renewable Energy Inc (TSX: INE, OTC: INGXF)–Mar. 23, 2012 (estimate)
• Just Energy Group Inc (TSX: JE, OTC: JUSTF)–Feb. 9, 2012, Flash Alert
• Keyera Corp (TSX: KEY, OTC: KEYUF)–Feb. 16, 2012, Flash Alert
• Northern Property REIT (TSX: NPR-U, OTC: NPRUF)–Mar. 13, 2012 (confirmed)
• Pembina Pipeline Corp (TSX: PPL, OTC: PBNPF)–Feb. 15, 2012, Flash Alert
• Provident Energy Ltd (TSX: PVE, NYSE: PVX)–Mar. 6, 2012 (confirmed)
• RioCan REIT (TSX: REI-U, OTC: RIOCF)–Feb. 15, 2012, Flash Alert
• Shaw Communications (TSX: SJR/B, NYSE: SJR)–Jan. 12, 2012, Flash Alert
• Student Transportation Inc (TSX: STB, OTC: STUXF)–Feb. 15, 2012, Flash Alert
• TransForce Inc (TSX: TFI, OTC: TFIFF)–Feb. 29, 2012 (confirmed)

Aggressive Holdings

• Acadian Timber Corp (TSX: ADN, OTC: ACAZF)–Feb. 7, 2012, Flash Alert
• Ag Growth International Inc (TSX: AFN, OTC: AGGZF)–Mar. 14, 2012 (confirmed)
• ARC Resources Ltd (TSX: ARX, OTC: AETUF)–Feb. 9, 2012, Flash Alert
• Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF)–Feb. 24, 2012, Flash Alert
• Crescent Point Energy Corp (TSX: CPG, OTC: CSCTF)–Mar. 16, 2012 (estimate)
• Enerplus Corp (TSX: ERF, NYSE: ERF)–Feb. 24, 2012, Flash Alert
• Extendicare REIT (TSX: EXE-U, OTC: EXETF)–Feb. 29, 2012 (confirmed)
• Newalta Corp (TSX: NAL, OTC: NWLTF)–Feb. 16, 2012, Flash Alert
• Noranda Income Fund (TSX: NIF-U, OTC: NNDIF)–Feb. 15, 2012, Flash Alert
• Parkland Fuel Corp (TSX: PKI, OTC: PKIUF)–Mar. 14, 2012 (estimate)
• Penn West Petroleum Ltd (TSX: PWT, NYSE: PWE)–Feb. 16, 2012, Flash Alert
• Peyto Exploration & Development Corp (TSX: PEY, OTC: PEYUF)–Mar. 9, 2012 (estimate)
• PHX Energy Services Corp (TSX: PHX, OTC: PHXHF)–Mar. 7, 2012 (estimate)
• Vermilion Energy Inc (TSX: VET, OTC: VEMTF)–Feb. 29, 2012 (estimate)