Both are geared up for strong, long-term growth this year and beyond. And they’re on target to pay generous distributions well protected with cash flow to boot.

New Conservative Portfolio addition Macquarie Power & Infrastructure Fund (MPT.UN, MCQPF) is run by a unit of the powerful Australian bank Macquarie Bank. During the past several years, the bank’s units have acquired a wide range of infrastructure-based assets, including toll roads, port facilities and Pittsburgh-based power utility DQE in the US.

Macquarie Power & Infrastructure was created April 30, 2004, with the goal of owning Canadian infrastructure. Since then, it’s acquired two major assets.

The Cardinal power plant in Ontario is a state-of-the-art combined cycle facility with a modest generating capacity of 156 megawatts. Since its startup in 1995, the plant has boasted an almost unheard of operating rate of 98 percent of capacity.

Electricity output is sold under a long-term contract expiring in 2014 to a Canadian government entity. Steam and compressed air—the other by-products of combined cycle generation—are sold to the largest corn refining plant in Canada under an energy savings agreement expiring in 2015. Natural gas used to fuel the plant is locked up under a long-term supply deal expiring in 2015.

The other significant asset is a 45 percent indirect equity interest in Leisureworld, the third-largest long-term care provider in Ontario. The remaining 55 percent of the operation—which includes 19 long-term care facilities, one retirement home and one independent living home—is controlled by parent Macquarie Bank.

In business since 1973, Leisureworld provides a steady stream of cash flow for the fund. That’s expected to rise further this year because capacity levels are expected to reach 97 percent. Coupled with strong performance and high selling prices at Cardinal, the two divisions increased distributable cash flow by 26.1 percent in the fourth quarter of 2006. That produced a payout ratio of just 77 percent for the overall trust.

The takeover of Clean Power Income Fund (CLE.UN, CEANF) is the most-aggressive step yet in the trust’s evolution and growth. The deal more than doubles the value of the overall enterprise, adding Clean’s 15 relatively small generating facilities in four Canadian provinces and four US states with a total capacity of 303 megawatts.

It also instantly positions Macquarie as a leading provider of carbon-neutral electricity, with expertise in wind power, hydropower and biomass power. Like the Cardinal plant, Clean’s output is almost exclusively sold under long-term contracts, most with escalator clauses built into rates. And because there are no fossil fuels used in production, there are no volatile fuel costs with which to contend.

On its own, Clean’s biggest problem has been debt left over from a disastrous foray into gas recovery systems in the US and the cost of building out a major wind power complex. The trust reduced total debt by 17.8 percent in 2006, but it’s still 133 percent of equity. That’s a major reason distributable cash flow has routinely failed to cover the dividend for several years and why the fourth quarter payout ratio was still 115 percent.

With its debt at just 14.2 percent of equity, Macquarie can absorb Clean’s obligations and still maintain a healthy balance sheet. The merger terms include an effective dividend cut of 20 percent for Clean shares, and the two trusts trade at basically identical multiples to book value. As a result, Macquarie is effectively getting Clean’s assets with a much lower cash burden and no real dilution.

Looking ahead, Macquarie’s strong sponsorship from its Aussie parent and growing scale make more acquisitions likely. The trust’s historical dividend growth rate of around 6 percent may slow depending on how aggressive it is. But the yield of nearly 10 percent is reward enough for waiting to watch its growth unfold.

As for 2011 taxation, about 25 percent of Clean’s assets and 15 percent or so of post-merger Macquarie’s cash flow comes from the US. There’s also substantial depreciation and amortization to shelter Canadian earnings. And Macquarie could elect to take the enterprise private again. In the meantime, however, management will continue to use trust sector turmoil to expand cash flows. Buy Macquarie Power & Infrastructure Fund up to USD12.

Aggressive Portfolio holding Precision Drilling (PD.UN, NYSE: PDS) has had a challenging year. Net earnings per share fell 29 percent in the traditionally robust first quarter on a 23 percent dip in revenue. The primary reason was the trust’s lowest total for drilling rig operating days since 2002 and its worst for the first quarter since 1999.

Those figures are expected to be even worse in the second quarter, as cold weather in late March and heavy snowfalls in northern areas have lengthened road bans. Management also expects average contract drilling rates to decline again on more-competitive pricing, though service rates have steadied.

Precision shares are down 26 percent over the past 12 months, reflecting the 30 percent distribution cut earlier this year. The good news: Industry conditions and the trust’s cash flow, distributions and the share price now appear to have bottomed, and the recovery promises to be explosive.

First, although it couldn’t completely dodge the impact of the dramatic slowdown in Canadian drilling activity, management did anticipate it. As a result, even depressed first quarter cash flows covered the current distribution by a wide margin, with the payout ratio at just 45.2 percent. Operating expenses were held in line with the decline in revenue. The balance sheet is exceptionally healthy, with long-term debt just 11.3 percent of equity.

As for capital spending, the trust continues to invest heavily in its growth, with nearly two-thirds of capital expenditures going to expand assets. However, cash flow in the first quarter covered distributions and all capital costs, with money left over to pay off bank debt. That’s allowed the trust to avoid issuing new shares and triggering potential dilution.

As a result, the new lower distribution rate appears secure, regardless of how difficult the second quarter winds up being. More important, Precision is extremely leveraged to a resumption of the energy bull market later this year.

Natural gas prices have already begun bouncing back with a vengeance, particularly in the forward sales market. Gas storage levels are now actually 10 percent below year-earlier levels after reaching record heights in recent months. That, plus a return to more normal weather in North America, promises to drive gas prices higher still, which should ultimately revive drilling and sales.

When it went trust two years ago, Precision simultaneously unloaded its energy services and international contract drilling operations to focus on its Canadian roots. The trust, however, has since extended its reach in the US, a move that should enhance growth and provide greater revenue diversification in the future.

Precision has 40 percent of Canada’s deep drilling market, the most-durable segment. And it performs other less cyclical functions as well, such as catering and well completion, that aren’t so dependent on the level of drilling activity.

Like the rest of the energy patch, Precision’s cash flows will always be hostage to energy price swings. But until there’s real demand destruction through conservation and adoption of alternatives, a new discovery of conventional reserves and probably a recession, dips in energy prices as we’ve seen in the past year will be buying opportunities.

Moreover, the trust remains the easiest way for a foreign entity to grab a dominant piece of the Canadian oil services market. And its price of just 2.5 times book value is well below that of other drillers.

The trust’s distribution is slated to be taxed as a corporation after 2011. US revenue will be exempt, as will depreciation from its rich asset base. Relative to energy prices, however, tax questions will play a minor role in determining Precision’s long-term returns. If energy stays strong, the trust’s shares are headed a lot higher. That’s my bet, and it’s why I continue to recommend Precision Drilling as a buy up to USD30.

Note that both Macquarie and Precision are conventional income trusts. Canadian authorities withhold 15 percent of distributions at the border, which can be recovered as a foreign tax credit by filing Form 1116 with your US taxes. Distributions of both trusts should be treated as qualified dividends in the US.