Former CE Portfolio Aggressive Holding IBI Group Inc (TSX: IBG, OTC: IBIBF) on May 23 announced the immediate suspension of its dividend.

We recommended investors sell IBI in a May 17, 2013, Flash Alert.

In addition to ongoing operational challenges, management acknowledged, if only in a roundabout way, other pressures on its payout policy when it discussed first-quarter 2013 results.

As we noted in the May 17 Flash Alert:

Management was alarmingly reticent to discuss IBI’s significant debt obligations coming due over the next 20 months during its first-quarter conference call, dismissing a question from an analyst with the following response, from Chairman and CEO Phil Beinhaker:

I don’t really want to discuss them now other than what we’ve said before, and that is that we are aware of them. And we are working on a variety of approaches to manage them in a timely manner and not to wait to the last day. And we have a number of alternatives and the board will consider them and deliberate on them and we look forward to implementing them over the ensuing quarters.

Overall debt as a percentage of total assets was a relatively high 45.1 percent as of the end of 2012, and management sought and received an adjustment to get IBI in line with its fixed-charge coverage ratio for the year-end period. Among the three metrics that are the focus of IBI’s debt covenants is the payout ratio. This raises the specter of another dividend reduction should operating conditions not improve.

And based on management’s rather tepid commentary on the operating environments in its three main markets we’re not encouraged. Coupled with IBI’s underwhelming operating and financial performance for the first quarter, it’s time to exit the position.

In lieu of what would have been the declaration of the company’s next quarterly dividend, management said in a statement that “after careful consideration” the payout on its common shares for the quarter beginning March 1, 2013, and going forward would be suspended, effective immediately.

IBI cited its “commitment to manage cash to strengthen its balance sheet and manage its operations through a difficult period.” Management noted that it will “revisit” the company’s dividend policy in consideration of profitability and cash flow in the quarters ahead, as IBI “moves into solid and sustainable operations and an improved balance sheet.”

The market responded positively to IBI’s effort to shepherd cash flow, pushing the share price higher by 4.4 percent the day after the announcement of the dividend cut. IBI has since slipped as low as CAD2.10 and closed at CAD2.16 on June 6.

Use any strength as an opportunity to sell IBI Group if you haven’t yet and establish a loss to offset any capital gains you may realize for 2013.

Wajax Corp (TSX: WJX, OTC: WJXFF) announced a 25.9 percent reduction in its monthly dividend rate on May 10.

Wajax had been on the Dividend Watch List because of weak fourth-quarter earnings and due to management’s oft-expressed willingness to trim the payout as it copes with ongoing difficulties associated with reduced drilling in the Canadian energy patch.

CEO Mark Foote acknowledged in a statement announcing results that numbers for the first quarter “were moderately less than…expectations and lower than last year,” attributing the twin shortfalls to continuing weakness in the oil and gas market and a decline in mining activity.

Management also expects oil and gas market weakness to persist through 2013, with demand for new equipment and aftermarket services for drilling and well stimulation continuing to be soft.

First-quarter mining-related declines were primarily due to the loss of the LeTourneau product line, which was only partially offset by other mining-related after-market improvements. Management noted that quoting activity remains reasonably strong for the Equipment segment as well as Power Systems’ electrical power generation business.

But project delays and reductions in capital spending have combined to limit the ability of many of Wajax’ customers to commit to new equipment orders. Management therefore expects mining-related sales to continue to be weak.

Earnings for 2013 are likely to be lower than in 2012, another factor, in addition to a weaker backlog and cloudy forecasts for oil and gas and mining activity over the balance of the year, behind management’s decision to cut the monthly dividend rate to CAD0.20 per share from CAD0.27.

We have more on the Aggressive Holding in Portfolio Update. Wajax remains a hold.

Chorus Aviation Inc (TSX: CHR/B, OTC: CHRVF) cut its dividend in half on May 10, a direct consequence of its ongoing dispute with Air Canada (TSX: AC/A, OTC: AIDIF).

Chorus reduced the quarterly rate from CAD0.15 to CAD0.075 effective with the payment due in July in order to conserve cash.

Chorus and Air Canada are still involved in arbitration process over cost mark-up. Chorus expressed confidence in its position but warned that an adverse outcome would result in it owing a significant retroactive payment to Air Canada, dating back to the start of 2010, due to the lengthy arbitration process. An outcome has been delayed until late 2013.

Under a capacity purchase agreement, Chorus operates 131 aircraft for Air Canada under the Jazz brand. It flies to smaller destinations and to large communities in off-peak hours throughout Canada and into the US.

Management had said that it was “comfortable” with the CAD0.15 rate but also had noted that the rate is subject to review. Although it noted that it has cash on hand sufficient to cover the old rate the board determined that the uncertainty of the Air Canada situation warranted a more conservative payout policy.

Operating revenue for the first quarter declined 4.8 percent to CAD416.3 million. Passenger revenue excluding pass-through costs decreased by 2.5 percent.

Net income declined by 64.9 percent to CAD9.2 million, or CAD0.07 per share. Adjusted earnings were CAD14.7 million, or CAD0.12 per share, down 35.4 percent compared to the first quarter of 2012. Sell Chorus Aviation if you haven’t yet.

Penn West Petroleum Ltd (TSX: PWT, NYSE: PWE) announced a 48.1 percent cut in its quarterly dividend rate, from CAD0.27 to CAD0.14 effective with the third-quarter payment due in October.

In a June 4, 2013, statement that covered much more than the new dividend policy, Penn West also announced the retirement of CEO Murray Nunns, a commitment to “focus on operating the business in a more efficient manner” and the formation of a special committee of the board of directors to explore strategic alternatives.

David Roberts, a former senior executive with Marathon Oil Corp (NYSE: MRO), has been named to replace Mr. Nunns and will assume his new role on June 19.

Operational changes include significantly reducing general and administrative expenses as well as field operating costs.  New Chairman of the Board Rick George noted that Penn West expects to begin by cutting about 10 percent of the company’s staff “over the next few weeks.”

Strategic options on the table include financing alternatives, asset divestments, joint ventures and/or other business combinations.

Along with first-quarter results released in early May, Penn West announced that John Brussa was stepping down as chairman of the board. Existing director Jack Schanck replaced Mr. Brussa. And now Mr. Schanck has been replaced by Mr. George, who is the former CEO of Suncor Energy Inc (TSX: SU, NYSE: SU).

Penn West posted a 21 percent decline in first-quarter funds from operations to CAD267 million, or CAD0.55 per share. Production for the period was lower by 15 percent at 142,804 barrels of oil equivalent per day.

Management reported reduced light-oil realizations, slightly offset by lower operating expenses. The company suggested that it was on track to meet its 2013 capital efficiency and production targets.

Debt remains a concern, and the ongoing “portfolio turnaround” for a company that has seemingly been in transition for half a decade will likely be revised under new leadership. Penn West remains a hold.

Please note that, because of the volatile nature of commodity pricing, all Oil and Gas companies in the How They Rate coverage universe should be considered permanent members of the Dividend Watch List.

New to the List this month is Aggressive Holding Colabor Group Inc (TSX: GCL, OTC: COLFF). Colabor is currently yielding 17.6 percent.

As we noted last month, management was less than stirring in its endorsement of the current CAD0.18 per share quarterly dividend rate. CEO Claude Gariepy took pains, actually, to establish that dividend policy is matter of board responsibility, noting, “I have no mandate at this moment to challenge the fact that we have a CAD0.72 dividend.”

This sounds like an manager who might appreciate the greater freedom of movement a lower payout burden would entail in the aftermath of what he himself described as “disappointing” first-quarter results.

Crucially, Colabor’s progress on benchmarks we established when the company posted fourth-quarter and full-year 2012 results was difficult to see in its report for the first three months of 2013.

We suggested last month that conservative investors exit the position in favor of our May Best Buy selections. Based on the lack of progress on the benchmarks we established in March and the further deterioration in the share price, we’re ready to recommend that investors of all risk tolerances stand aside. Sell Colabor Group.

Extendicare Inc (TSX: EXE, OTC: EXETF) was the headliner of May’s Dividend Watch List feature after it became the only member of the How They Rate coverage universe to cut its payout in the month leading up to publication of that issue.

But its 42.8 percent reduction in its monthly rate to CAD0.04 establishes a pro forma payout ratio–based on first-quarter adjusted funds from operations of CAD0.211 per share–of approximately 57 percent. And that’s enough to get it off the List.

First-quarter results were in line with management guidance, and the dividend reduction means Extendicare is living up to its philosophy “of maintaining a conservative payout level.” The company has also announced that it will separate its US and Canadian operations. This will allow the more stable–and growing–Canadian business to be valued apart from the unsettled US business. We have more details on Extendicare in Portfolio Update. We have, however, raised our rating on the stock.

Extendicare, priced to yield 7.2 percent based on the new dividend rate, is a buy under USD7 for aggressive investors.

Here’s the rest of the Dividend Watch List. Not all members are sells, though the most conservative investors should avoid the lot of them.

Bonavista Energy Corp (TSX: BNP, OTC: BNPUF) reported flat first-quarter revenue, though funds from operations ticked up by 5 percent on a 3 percent increase in output. A 37 percent increase in realized natural gas prices offset a 4 percent decline for natural gas liquids prices and a 9 percent decline in realized crude prices.

The key remains management’s ability to lock in pricing for future production and establish a solid and predictable cash stream. Hold.

Cathedral Energy Services Ltd’s (TSX: CET, OTC: CETEF) first-quarter funds from operations per share slid to CAD0.20 from CAD0.46 a year ago, as revenue declined 20.3 percent due to the slowdown in Canadian. This was offset somewhat by US production testing.

It’s still a volatile environment for Energy Services firms, and the company is coming off a fourth quarter where funds from operations declined by 61.7 percent. Hold.

Chorus Aviation Inc’s (TSX: CHR/B, OTC: CHRVF) place on the List is explained above. Sell.

CML Healthcare Inc’s (TSX: CLC, OTC: CMHIF) first-quarter payout ratio improved to 75 percent from 77 percent in the fourth quarter of 2012, as normalized funds from operations ticked up to CAD15.9 million from CAD15.5 million. But revenue declined to CAD62.2 million from CAD64.9 million a year ago.

Management announced in January a plan to sell its diagnostic imaging business, with a goal of completing the divestment by the end of 2013. Management said at the time of the original announcement that it had started talks with prospective buyers, some of whom have expressed interest in the entire portfolio, some of whom are interested in particular provinces, some of whom are interested in regions within particular provinces.

There could be a single deal announced at once or several revealed in series.

Financial and operating numbers have been steady for three quarters now; this set of numbers is also supportive of the reduced dividend level and earns CML an exit from the List. Hold.

Data Group Inc’s(TSX: DGI, OTC: DGPIF) first-quarter revenue ofCAD82.9 million missed guidance, but management pointed to new customer agreements and cost reductions as signs of progress on its rebound strategy.

The share price surged from an all-time closing low of CAD1.65 on Feb. 27 to CAD2.48 on March 8 on significant volume. But it’s back down to CAD2.02 as of June 6, as questions remain about any business attempting the transition from print to digital.

The new quarterly dividend rate of CAD0.075 per share will allow more debt reduction and business investment than the old monthly rate of CAD0.0542 per share. But the issue here is more fundamental. Hold.

Eagle Energy Trust(TSX: EGL-U, OTC: ENYTF), a recent addition to the How They Rate coverage universe, is already seeing its dividend under pressure as a small producer in a tight environment.

First-quarter funds flow from operations grew by 30 percent year over year and 20 percent sequentially to CAD11.9 million, and costs declined by 37 percent. Encouragingly, management boosted full-year capital expenditure and funds flow guidance. Hold.

Extendicare Inc’s (TSX: EXE, OTC: EXETF) place on the List is explained above. Hold.

FP Newspapers Inc’s (TSX: FP, OTC: FPNUF) first-quarter numbers give the appearance of improvement, as net income rose slightly to CAD1 million from CAD800,000 a year ago. But its FP LP operating unit reported a 4 percent decline in revenue due to a 5 percent slide in advertising. And circulation figures continue to decline.

A shrinking business with rising costs is not long to support the current dividend rate. Sell.

Freehold Royalties Ltd (TSX: FRU, OTC: FRHLF) saw a 4 percent increase in average production from its lands during the first quarter. But this was offset by a 10 percent decline in realized prices. Funds from operations slid 7 percent to CAD23.8 million.

The dividend was covered by free cash flow. And debt reduction continues. There’s little margin for error here, though improving differentials will continue to help support the dividend. Hold.

GMP Capital Inc(TSX: GMP, GMPXF) reported a 26.1 percent decline in first-quarter revenue to CAD48.8 million. The financial services firm posted a net loss of CAD0.02 per share due to, in management’s words, “the near-term impact of ongoing malaise in global markets.”

The payout ratio for the period soared to 192 percent. Hold.

IBI Group Inc’s(TSX: IBG, OTC: IBIBF) place on the list is explained above. Sell.

Labrador Iron Ore Royalty Corp (TSX: LIF, OTC: LIFZF) reported that first-quarter royalty income grew to CAD26.1 million from CAD22 million a year ago. Adjusted cash flow, however, was down to CAD0.22 versus CAD0.23 due to higher income taxes.

Labrador has hired its own advisers to study strategic alternatives following Rio Tinto Plc’s (London: RIO, NYSE: RIO) announcement of a plan to study its Iron Ore Company stake. And it’s been reported that global resources giant Glencore Xstrata Plc (London: GLEN, OTC: GLCNF, ADR: GLNCY) is exploring the possibility of buying the asset.

The fate of the dividend is tied to what happens with the facility that generates Labrador’s cash flow. But if it sells itself all questions are answered. Hold.

Manitoba Telecom Services Inc (TSX: MBT, OTC: MOBAF) reported a 31.9 percent increase in first-quarter free cash flow to CAD47.6 million, though revenue was off 6.5 percent to CAD406.7 million due to legacy declines and planned reductions.

Management has also struck a deal to sell its Allstream for CAD520 million to Egyptian telecom magnate Naguib Sawiris, founder and non-executive chairman of Accelero Capital Holdings. The cash realized from the sale should help MTS grapple with a growing pension-funding deficit that it continues to perpetuate–all within Canadian law–so it can post inflated free cash flow numbers. Sell.

New Flyer Industries Inc’s (TSX: NFI, OTC: NFYED) first-quarter 2013 orders reached 2,004 equivalent units, the highest level since the fourth quarter of 2008 and the fourth consecutive sequential increase. And units delivered were up 10.9 percent, as free cash flow covered the dividend covered the dividend for a second consecutive quarter.

Management also stated its belief that “sufficient free cash flow will be generated to maintain the current annual dividend rate of CAD0.585.” But the key driver of revenue–government spending–continues to be constrained all over North America. Hold.

Northland Power Inc’s(TSX: NPI, OTC: NPIFF) first-quarter adjusted EBITDA declined slightly due to a rate decrease at its Iroquois Falls project and lower production at two wind farms. These negatives were offset by solid performance at the Jardin wind farm and good results at Kingston and Thorold.

Management announced acquisitions of a natural gas-fired and a biomass-fired power plant in April, demonstrating it has the balance-sheet strength to continue to grow. The plants should add to cash flow in the second half of 2013. Management still concedes, however, that the dividend won’t be covered by free cash flow until 2014. Hold.

Parallel Energy Trust’s(TSX: PLT-U, OTC: PEYTF) first-quarter average production of 6,803barrels of oil equivalent per day was below management’s forecast of 7,200 due to significant weather disruptions in January and February and underwhelming results from a new drilling technique. The payout ratio, however, declined to 92 percent from 139 percent in the fourth quarter.

This small producer already has one dividend cut under its belt. Until operations show a consistent track and the payout ratio comes down even more it remains on the List. Hold.

Penn West Petroleum Ltd’s (TSX: PWT, NYSE: PWE) place on the List is explained above. Hold.

Precious Metals & Mining Trust(TSX: MMP-U, OTC: PMMTF) has been paying out a high distribution despite the fact that the 93.67 percent of the closed-end fund’s holdings that are gold and silver miners have generated zero investment income over the past year.

There are far better ways to play a rebound in gold and silver prices, including solid individual mining companies such as Barrick Gold Corp (TSX: ABX, NYSE: ABX) that are covering their payout. Sell.

Ten Peaks Coffee Company Inc (TSX: TPK, OTC: SWSSF) reported a solid increase in volumes processed as well as a 72 percent increase in gross profit in the first quarter. Importantly, cash flow from operations surged by 141 percent, allowing management to pay down debt, strengthen the balance sheet and build in some protection for the current dividend rate.

Ten Peaks is adding market share on solid performance in the US, where volumes have grown 35 percent over the past three years. But coffee is a tough, volatile business, and it’s a hard model on which to base a dividend-paying business. Management will report first-quarter 2013 results on or about May 10. Sell.

Wajax Corp’s (TSX: WJX, OTC: WJXFF) place on the list is explained above. Hold.

Zargon Oil & Gas Ltd (TSX: ZAR, OTC: ZARFF) reported a 15 percent sequential decline by a 3 percent increase in first-quarter funds from operations to CAD13.9 million. The small oil and gas producer’s realized oil price declined by 13 percent, and it remains highly susceptible to fluctuating commodity prices.

First-quarter costs also ticked higher, though improving scale will help over the long term. Management maintained the CAD0.06 monthly dividend rate for payments in August, September and October. Hold.