Nineteen of the 165 companies and funds currently tracked in the Canadian Edge How They Rate coverage universe have suspended or eliminated distributions since 2007. The general rule is that a dividend cut is a sell sign. We follow quarterly results closely, looking for signs of breakdowns in the businesses that support our regular dividend checks, with the idea that we’ll be in front of any cuts. A combination of policy choices that basically killed the tax-advantaged Canadian income trust sector and an historic global economic meltdown have tested this rule, as management teams have had to cope with multiple aggressive and unpredictable demands on cash flow.

As we’ve seen over the past several quarters, the businesses that comprise the Canadian Edge Portfolio have ridden out the Great Recession. Historically low interest rates have allowed them to lock in new financing or refinance old debt, freeing up cash flow to reinvest in the business or share with investors. For the most part businesses that survived entered the Great Recession on sound footing, were operating in industries where cash flows were easy to identify and sustain and were committed to paying dividends over the long term.

Over time, even as trusts grappled with the impact of new taxation beginning in 2011, the virtue of honoring commitments to shareholders began to win out and more and more management teams opted to hold payouts steady into the new era. That’s the bright side of the post-Halloween Massacre.

Here’s the dark side, a look at nineteen companies that once paid dividends but because of a combination of events no longer do. For some proactive companies eliminating a dividend freed up cash that could be plowed into productive assets to boost the value of the business for the long term. Others used cash to pay down excessive debt rung up chasing high-risk expansion opportunities. Some businesses were unsuited to pay a regular distribution, whether because management used converting into an income trust in the first place as a cash-out strategy and had no interest in long-term wealth building for outside investors or for the simple reason that the assets couldn’t and wouldn’t generate sufficient predictable cash flow, no matter the level of competence of the people making the decisions.

Amid this morass–the bungled and the botched–there are some gems, and we close with one company that actually became a dividend-payer after it was added to the Canadian Edge coverage universe.

Advantage Oil & Gas (TSX: AAV, NYSE: AAV) eliminated its distribution entirely in March 2009 as part of an early move to convert to a corporation. At the time CEO Andy Mah explained that Advantage wanted to focus as much of its resources as possible on its huge find at the Glacier prospect in the Montney Shale formation in Alberta. Low natural gas prices made it virtually impossible to imagine Advantage being able to exploit the resource in the manner it hoped while still paying a dividend.

The unit price bottomed around CAD2.60, right around the time the whole market was making its post-Lehman Brothers low. Since then it’s rallied to north of CAD5, validating Mr. Mah’s ambition. Proactive Advantage is the model of a rational transition from a growth-and-income orientation to growth only. In the second quarter of 2011 output–which is now more than 90 percent gas–rose 22 percent despite difficult drilling conditions. Management forecast 24 percent production growth by the summer of 2012. It trimmed operating expenses by 17 percent year over year as well. Advantage Oil & Gas is an aggressive bet on natural gas up to USD10.

Bellatrix Exploration (TSX: BXE, OTC: BLLXF), at the time known as True Energy Trust, stopped paying a distribution in February 2009 after a series of capital-spending cutbacks and corresponding production declines. Management got a grip on the company’s debt issues, and production is back up above 11,000 barrels of oil equivalent per day, weighted 62 percent gas, 38 percent oil. A successful foray into shale gas has fueled Bellatrix’s turnaround.

Second-quarter production rose 51.8 percent, as operating expenses per barrel of oil equivalent declined 11.5 percent. That combination triggered 90.9 percent growth in funds from operations per share. Bellatrix Exploration is a buy up to USD6 for aggressive investors.

Equal Energy (TSX: EQU, NYSE: EQU) was Enterra Energy Trust when it discontinued its dividend in September 2007 after natural gas prices declined from above USD8 to the mid-USD5 range. Although the company has now shifted its production mix in favor of oil and debt is coming under control, operating results remain lackluster. Second-quarter output was off 1 percent, as declining gas production offset a rise in oil output. Funds from operations declined 6 percent. Back from the worst of its turmoil, Equal Energy is a hold for investors who own it.

Primary Energy Recycling (TSX: PRI, OTC: PENGF) finally stopped paying a dividend in June 2009, but its difficulties trace to 2007, when it was forced to cut its payout by roughly 30 percent. After it reduced in early 2007 management had to hold back dividend payments from September until December after unexpected problems at one of its four projects at the time.

Primary runs facilities attached to steel manufacturing plants that convert waste energy to electrical and thermal energy. Since its original difficulties things have gone rather smoothly at the operational level. But steel producers suffered through extremely difficult market conditions until mid-2009 and now face the prospect of a slackening recovery.

Second-quarter financial results reflect some stabilization–management actually reported that total gross electric production and output at the Harbor Coal facility, the locus of its 2007 troubles, have both reached five-year peaks. The company is currently involved in important negotiations for one facility but has recently completed work on a new pact at another that builds in modest growth for Primary Energy. Still digging out from the last decade’s rubble, Primary Energy Recycling is worth holding.

Arctic Glacier Income Fund (TSX: AG-U, OTC: AGUNF), an ice manufacturer felled by antitrust lawsuits in Canada and the US. Management discontinued the dividend in September 2009 after months of lawyer fees on both sides of the border sapped its ability to also support normal business operations. Sell.

Armtec Infrastructure Inc (TSX: ARF, OTC: AIIFF) is perhaps the most compelling of these brief stories.

Armtec makes and sells, among other things, polyethylene, corrugated steel and concrete pipe and pre-cast, pre-stressed concrete products for use in bridges, water retention systems and other infrastructure applications. It raised its dividend seven times from September 2004 until making a final monthly payment of CAD0.18 per share in January 2011.

At that time, with its conversion to a corporation, Armtec switched to a quarterly, CAD0.40 per share payment. The first of those, declared Mar. 15, 2011 for shareholders of record as of Mar. 31, was distributed on Apr. 15. Including six “special dividends” declared from 2005 to 2009, Armtec paid out a total of CAD12.63 per unit/share between September 2004 and April 2011, trimming by 26 percent only when it converted.

And then the walls came crumbling down. A horrible first-quarter earnings report on Jun. 8 surprised Bay Street, and the stock price cratered from the mid-teens to around CAD2.50 by late June. The company disclosed that it would be unable to satisfy leverage and earnings tests mandated by its credit facilities and senior notes before it could pay a dividend.

After closing a financial arrangement with Brookfield Asset Management (TSX: BAM, NYSE: BAM) in July that allowed it to pay off in full all of its lenders–and lifted the stock to above CAD4.70, Armtec announced that it would take a CAD140 million goodwill charge. Management also issued negative guidance for two business units for coming quarters.

The deal with Brookfield means Armtec has CAD90 million with which to pay back creditors. But the recent skein of bad news has rankled investors who bought into Armtec’s CAD58 million equity issue at CAD16.20 per share in April into a shareholder lawsuit. The analyst community has run from the stock, as management was unable to assuage concerns during its Aug. 10 second-quarter conference call. Of biggest concern is that second-quarter gross margin plunged 57.4 percent, while cash flow declined 82.3 percent because of a bad operating environment. There simply isn’t a lot of heavy infrastructure investment happening in major North American markets right now. No longer paying a dividend and with serious financial constraints on its ability to recover and grow, Armtec Infrastructure is a sell.

Cinram International Income Fund (TSX: CRW-U, OTC: CRWFF) might be called victim of technology and the march of time. Betamax lost to VHS, VCRs were overcome by DVD players, but now Blu-Ray has trumped DVDs. And soon it’ll all be digital download, direct to device, with no need for media in between. Management was never able to catch up.

Second-quarter revenue declined 42.4 percent, 14 percent excluding the loss of main customer Warner Home Video, and new covenants on a renegotiated lending package will all but wipe out shareholder value. Sell Cinram International.

Norbord (TSX: NBD, OTC: NBDFF) manufactures and markets oriented strandboard (OSB) for use in the construction industry. When real estate crashed, it did, too. We added it to How They Rate coverage as a turnaround story way, way too early as it’s turned out. The company suspended its distribution in November 2008 and subsequently reverse split on a 1-for-10 basis. Its unique market position and geographic diversification mean the business is likely to survive, but the prospect of a dividend at this point is a well down the road and the stock price continues to ride a rollercoaster defined by US economic news. Hold Norbord if you own it.

Lanesborough REIT (TSX: LRT-U, OTC: LRTEF) levered up to try to take advantage of the mid-2000s boom in Fort McMurray, Alberta, the town nearest the vast oil sands reserves in northwest Canada.

It was forced to divest much of its holdings in the region at subpar prices in order to meet its creditors’ demands after oil prices cratered from USD145 in mid-July 2008 to USD34 by mid-December 2008. Short-term cash needs continue to impede the REIT’s efforts to get back on solid footing. A revival of investment in the oil sands and signs of a turnaround in Fort McMurray–occupancy at Lanesborough’s properties there rose to 84 percent in the second quarter from 66 percent in the first–are encouraging. But distributable income was still negative for the three months ended Jun. 30, 2011, and hopes for a turnaround are remote.

Lanesborough paid its last distribution on Mar. 15, 2009. On Mar. 25, 2009, the REIT declared a CAD0.06 dividend payable Jul. 15, but management cancelled that plan and discontinued the dividend altogether on Aug. 17, 2009. There are many better ways to play the Canadian real estate story. Sell Lanesborough REIT.

Noranda Income Fund (TSX: NIF-U, OTC: NNDIF) paid a final CAD0.04 per unit distribution on Jul. 27, 2009. That payment, declared the preceding Jun. 19, came just a week after management discontinued the distribution because of depressed demand and prices for its processed zinc and byproducts amid the Great Recession.

During the second quarter of 2011 Noranda closed a CAD90 million private placement of 6.875 percent senior secured notes due in 2016 and also negotiated a five-year revolving credit facility that provides CAD150 million of financing. These moves eliminate near-term refinancing risk that had been overhanging the stock.

Also on the plus side, cash flow from operating activities in the second quarter rose 16 percent to CAD21.4 million. Zinc metal production was 4 percent higher than in the year-ago quarter, and Noranda was able to realize higher prices for its output. Copper in cake sales more than doubled, while sulfuric acid production was up 13 percent.

With long-term financing in place and restrictions on its uses of cash eased, management is now considering the reinstatement of a dividend. If you own Noranda Income Fund, hold it; this is one company for whom a retrenchment may lead to a refreshing future.

PRT Forest Regeneration Fund (TSX: PRT-U, OTC: PFSRF) discontinued its dividend in December 2008 because of weak demand for forestry products. The demise of new home construction in North America destroyed demand for timber and PRT’s reforestation services.

The market for seed processing and reforestation treatment continues to solidify, though not enough to return to pre-2008 levels. The company was able to make a number of low-cost acquisitions that position it to benefit should market conditions turn around in earnest. PRT Forest Regeneration is a hold.

Tree Island Wire Income Fund’s (TSX: TIL-U, OTC: TWIRF) January 2009 suspension of its dividend was also driven by the crash of the American housing market, and its recovery is tied to a return to health for that all-important sector. Second-quarter revenue was off 1.8 percent, as a strong Canadian dollar offset higher prices for its products and steady volume. Management recently introduced a plan to buy back 10 percent of outstanding shares, but the die may already have been cast here. The stock has languished below CAD1 for more than two years. Sell Tree Island Wire.

Essential Energy Services (TSX: ESN, OTC: EEYUF) cut its distribution three times before finally eliminating it in November 2009. There wasn’t much to recommend the stock–which was spun out from AvenEx Energy Corp (TSX: AVF, OTC: AVNDF) when that company was Avenir Diversified Income Trust, before it cut the payout to zero.

Second-quarter cash flow was negative during a seasonally weak period, but the recent move to acquire Technicoil, which manufactures coiled tubing equipment for drilling and fracturing, looks to be a positive. If you own Essential Energy Services it’s a hold.

Precision Drilling Corp (TSX: PD, NYSE: PDS), saddled with too much debt after levering up during the mid-2000s boom, cut is payout four times from early 2007 before finally capitulating in February 2009. We advised selling the stock in the immediate aftermath of the cut, which was triggered by Precision’s fraught but eventually successful acquisition of US-based Grey Wolf, the cost of which rose sharply during the credit crisis in part because Grey Wolf management kept dancing around before finally agreeing to a deal.

The move into the US has helped balance Precisions operations–it’s no longer solely exposed to the western Canada drilling season–and a new focus on oil should help it better navigate inevitable downturns for energy prices. Precision Drilling is now worth a hold.

Royal Host Inc (TSX: RYL, OTC: ROYHF), along with Imvescor Restaurant Group Inc (TSX: IRG, OTC: IRGIF)  the most recent companies to join the ranks of “The Bungled and the Botched,” announced on Mar. 24, 2011, along with its fiscal fourth-quarter earnings, that it wouldn’t declare a post-conversion dividend “at this time.” Management’s official statement was it would be better to “re-invest capital into the company’s hotel properties and refinance debt that’s coming due this year.”

Royal Host’s dividend suspension is part of a series of cost-cutting moves that should ensure the survivability of the business. But there’s significant debt reduction still to be done, and the company has properties it must also maintain.

It’s no longer a real estate investment trust because of the nature of its assets, and there’s no visibility on when a dividend might be paid. But Royal Host is a hold for those who own it.

Imvescor’s move is part of an extensive restructuring process, triggered by a rapid decline in appeal at certain of its brands. Management is calling the dividend elimination a “postponement,” triggered by its need to maximize cash on hand for the effort. The company will be “optimizing” its capital structure, mainly to identify options for the CAD23 million in convertible debentures that come due Dec. 31, 2011. That suggests it will resume payments at some level once it’s able to deal with this obligation.

Imvescor and Priszm Income Fund, both operators of fast-food restaurant franchises in North America, were blown out by excessive expansion. Priszm Income Fund has been delisted. Sell Imvescor Restaurant Group.

Tuckamore Capital Management Inc (TSX: TX, OTC: NWPIF) is the new name of Newport Inc, but the name change won’t do much to change the operation’s ultimate fate. The company hasn’t paid a dividend since October 2008 and, though second-quarter surged 21.7 percent and cash flow rose 8.1 percent, it’s unlikely to do so anytime soon. Sell.

Clearwater Seafoods Income Fund’s (TSX: CLR-U, OTC: CWFOF) last distribution was paid in January 2008. The company has had its ups and downs since showing a bit of recovery momentum several times over the past several years.

Shareholders have approved a conversion plan–which will conclude in December with the company’s transition to a corporation–but there’s no sign when a dividend might be paid. Second-quarter cash flow was up 44 percent, and steadying market conditions should help second-half 2011 results. Clearwater Seafoods is a hold for investors who own it.

The Other One

One company has become a dividend payer after being added to Canadian Edge How They Rate coverage, though we claim no causation, only point out the coincidence.

We added WestJet Airlines (TSX: WJA, OTC: WJAFF) to How They Rate in Xxx because “Canada’s Southwest Airlines” was able to sustain solid operating numbers through one of the most difficult economic environments in decades. In November 2010 management declared a CAD0.05 per share dividend, the company’s first ever.

Second-quarter earnings per share rose 260 percent, as WestJet added capacity and also managed to fill more seats. At the same time management was able to keep control of costs, which will prove critical as it advances expansion plans into Latin America. A leader in the low-cost air travel movement and one of Canada’s most admired companies, the carrier flies to 68 cities in its North America/Caribbean network.

The Airports Council International reported that passenger traffic rose 5 percent in July, a sign the global economy’s ills haven’t infected passenger carriers. WestJet itself reported an 83.3 percent load factor for August, up from 82.2 percent a year ago. Continuing to expand its range of destinations and roster of flights and now paying a CAD0.05 per share quarterly dividend, WestJet Airlines is a buy up to USD16.