Fortunes for both of this month’s Best Buys, Conservative Holding Brookfield Real Estate Services Inc (TSX: BRE, OTC: BREUF) and Aggressive Holding Acadian Timber Corp (TSX: ADN, OTC: ACAZF), relate to the health of the housing market and the broader economy.

The former’s business model is built around fixed fees and augmented by transaction income derived from its Canada-focused real estate service and ensures more stable revenue. The latter’s softwood and hardwood lumber, pulp products and biomass byproducts tie it to construction activity in North America and Europe, with much greater exposure to economic ups and downs.

Both companies are enjoying a North American and global economic rebound that continues to gather strength, as reflected in third-quarter financial and operating numbers as well as by management commentary and outlook about the future.

Brookfield Real Estate has increased the company’s targeted annual cash dividend per share from CAD1.10 per year to CAD1.20 for 2014, reflecting management’s confidence that a widely feared correction for the Canadian housing market, though it did happen, has passed and was nowhere near as severe as some observers expected.

The company will pay CAD0.10 per month beginning with the January 2014 installment payable on Feb. 28, 2014, to shareholders of record as of Jan. 31, 2014. That’s up from the CAD0.092 per share per month Brookfield Real Estate’s been paying since January 2011.

For the three months ended Sept. 30, 2013, the Canadian market transactional dollar volume was up 22.1 percent over the same period in 2012, driven by an 8.3 percent increase in selling price and a 12.7 percent increase in home-sale activity.

The third quarter of 2013 marked the first period of solid expansion for both house prices and sales volumes since Canada’s Ministry of Finance instituted new mortgage rules in July 2012.

Rolling 12-month transactional volume was up 0.8 percent to CAD169.3 billion on a 3.4 percent uptick in average price, partially offset by a 2.5 percent drop in home sales.

During the previous four quarters there was a marked decline in the number of homes trading hands, which kept house prices relatively flat in most markets. That trend reversed in the third quarter.

Management is confident that though there have been “sobering reminders in recent weeks” that the North American recovery remains fragile fundamental economic indicators in Canada and the US are, taken together, “positive.”

Monetary policy, for both the Bank of Canada and the US Federal Reserve, remains accommodative, as officials await hard data, such as the Fed’s 7 percent threshold for the unemployment rate, which may be lowered to 6 percent, before withdrawing extraordinary support.

Nevertheless, a strengthening labor market and economic growth will likely offset the drag that interest-rate hikes may have on the housing market.

Finance Minister Jim Flaherty, aided from the bully pulpit by Mark Carney, then governor of the Bank of Canada, issued new rules designed to counteract a Canadian housing market in overdrive in 2011 and the first half of 2012.

Rising prices combined eventually with more restrictive mortgage regulation to push buyers out of the market.

But predictions of serious declines in home values haven’t materialized. Pent-up demand as well as an acceptance that current market conditions are likely to hold through into 2014 prompted a much busier buying season than normal during July, August and September.

Brookfield Real Estate generates cash flow from franchise royalties and service fees derived from a national network of real estate brokers and agents in Canada operating under the Royal LePage, Via Capitale Real Estate Network and Johnston & Daniel brand names.

Variable fees are primarily driven by the total transactional dollar volume from the sales commissions of realtors, while fixed fees are based on the number of agents and sales representatives in the network.

Approximately 73 percent of the company’s revenue is based on fees that are fixed in nature; this provides revenue stability and helps insulate cash flow from market ups and downs.

As of Sept. 30, 2013, its network included 15,451 realtors operating under 435 franchise agreements providing services from 669 locations, comprising approximately 24 percent of the Canadian residential resale real estate market based on 2012 transactional dollar volume.

Management reported third-quarter cash flow from operations (CFFO) was CAD7.1 million, or CAD0.55 per share, flat on a year-over-year basis.

A CAD100,000 reduction in year-over-year administrative expenses due to lower bad-debt expenses was offset by reduced variable and premium fees, which was in part attributable to the timing of the increased market activity in 2012 closing out in the third quarter of 2012 and the ramping up of market activity in the third quarter of 2013.

The payout ratio for the third quarter, based on cash flow from operations, was 50.2 percent.

For the nine months ended Sept. 30, 2013, CFFO was CAD19.3 million, or CAD1.50 per share, compared to CAD20 million, or CAD1.56 per share, for the prior corresponding period. CFFO for the rolling 12-month period was CAD1.92 per share, down from CAD1.98 for the year ended Dec. 31, 2012.

The rolling 12-month payout ratio was 57.5 percent.

Royalties were down slightly to CAD10.1 million, or CAD0.79 per share, for the third quarter, compared to CAD10.2 million, or CAD0.79 per share, a year ago. Nine-month royalties were CAD27.9 million, or CAD2.18 per share, versus CAD28.4 million, or CAD2.22 per share, for the same period of 2012.

Brookfield Real Estate Services, which is yielding 8.8 percent at current levels, is a buy for consistent, sustainable income up to USD14.

Management of Acadian Timber, more sensitive to the market on the southern side of the border, noted that the US housing market “has entered a period of stabilization,” with improvement to be driven by new homeowners rather than investors.

Housing starts and average home prices in the US continue to improve on a year-over-year basis, though the rate of increase and consensus expectations have moderated since the second quarter.

Affordability is a key metric, and the Fed’s decision to delay the “tapering” of its bond-buying program will help keep interest rates–and therefore mortgage rates–relatively low.

Management expressed confidence in the recovery of the US housing market, based on feedback and orders from Acadian’s solid wood customers, most of whom are boosting capital investment, increasing operating shifts and ramping up log purchases.

Management, explaining a positive outlook for the remainder of 2013 and into 2014, noted that softwood lumber prices have largely recovered from the weakness seen in the late spring and early summer of 2013.

Demand for spruce-fir sawlogs from Acadian’s softwood sawmilling customers is strengthening, while markets for hardwood sawlogs remain stable.

Acadian is seeing softer pricing for softwood pulpwood markets following a modest recover in the second half of 2012 and early in 2013. Ample supply at regional pulp mills will put some pressure on Acadian’s New Brunswick operation.

Hardwood pulpwood markets are “reasonably strong,” with Acadian’s major hardwood pulp customers all operating and taking deliveries, suggesting that prices should remain stable through the remainder of 2013 and well into 2014.

Management noted that domestic markets for biomass remain stable, and export markets are growing. Acadian continues to be able to sell all of its biomass, and the outlook for gross margins is stable to modestly improving.

Acadian reported third-quarter net sales of CAD18.8 million, up 7 percent year over year, on volume of 343,000 cubic meters. Adjusted earnings before interest, taxation, depreciation and amortization (EBITDA) of was off by 13.6 percent to CAD3.8 million, while adjusted EBITDA margin slipped to 20 percent from 25 percent a year ago.

Dividends paid during the third quarter represented 94.7 percent of operating earnings.

Net sales for the first nine months of 2013 were CAD52.6 million on sales volume of 1,013,000 cubic meters compared to CAD50.4 million on 976,000 cubic meters for the prior corresponding period. Adjusted EBITDA of CAD11.3 million was unchanged from the same period of 2012.

Management noted cost pressures related to harvesting in more distant forest stands, the timing of reforestation expenditures and a non-cash, CAD900,000 decrease in the unrealized exchange gain on long-term debt, as net income declined to CAD3.4 million, or CAD0.20 per share, from CAD5 million, or CAD0.30 per share, a year ago.

Acadian’s weighted average log price for the third quarter increased 3 percent year over year, with product-level price increases somewhat offset by a heavier mix of pulpwood relative to the same period of 2012.

Backed by Brookfield Asset Management Inc (TSX: BAM/A, NYSE: BAM), Acadian has expanded its acquisition strategy to include interests in timberlands outside of Eastern Canada and the Northeastern US.

Management is exploring opportunities in North and South America and Australia, ranging from traditional pure-play timberland sales to monetization strategies by industrial owners looking to redeploy capital in their operating businesses. Acadian is focused on its long-term total return target of 10 percent to 15 percent.

Acadian Timber Corp, yielding 6.4 percent as of this writing, is a buy for aggressive investors under USD13.

For more information on Brookfield Real Estate Services, go to How They Rate under Financial Services. Acadian Timber is tracked under Natural Resources. Click on their US symbols to see all previous writeups in Canadian Edge and Maple Leaf Memo.

Click on the Toronto Stock Exchange (TSX) symbol to go to their Google Finance pages for a wealth of information, ranging from news releases to price charts. Click on their names to go directly to company websites.

Both companies are relatively small. Brookfield Real Estate has a market capitalization of CAD129 million as of Nov. 7, 2013. Acadian Timber is a bit bigger at CAD214 million. Both stocks have plenty of liquidity on both sides of the border, both in TSX and US-listed symbols.

Brookfield Real Estate trades on the US over-the-counter (OTC) market under the symbol BREUF. Acadian Timber also trades on the US OTC market under the symbol ACAZF.

Brookfield Real Estate has just one analyst tracking it, CIBC World Markets, which rates the stock a “hold.” The 12-month target price is CAD14.50, implying upside from a CAD13.60 intraday price on Nov. 7 plus dividends of CAD1.18 of 21.9 percent.

Acadian Timber is covered by two analysts, one of whom rates the stock a “hold,” one of whom rates the stock a sell. The first has a 12-month target price of CAD13, the second CAD12.

As is the case with all stocks in the Canadian Edge coverage universe, you get the same ownership whether you buy in the US or Canada. These stocks are priced in and pay dividends in Canadian dollars. Appreciation in the loonie will raise dividends as well as the value of your shares.

Dividends paid by Brookfield Real Estate and Acadian Timber are 100 percent qualified for US income tax purposes. Both companies’ dividends are taxed at the now-permanent Bush-era rates of 5 percent to 15 percent for investors’ first USD450,000 a year of income for couples and USD400,000 for single filers. Above that the maximum tax rate is 20 percent.

Canadian investors enjoy favorable tax status for Brookfield Real Estate and Acadian Timber. For US investors, dividends paid by Brookfield Real Estate and Acadian Timber into IRAs aren’t subject to 15 percent Canadian withholding tax, though they are withheld at a 15 percent rate if held outside of an IRA.