Conservative Holdings’ common strength is the ability to weather economic ups and downs and keep paying generous dividends. And both of January’s High Yield of the Month selections have definitely proven themselves in this regard.

Just Energy Group Inc (TSX: JE, OTC: JSTEF) has increased its dividend six times since October 2006, when Finance Minister Jim Flaherty announced a new tax on income trusts to have effect in January 2011. It’s now made the conversion to a corporation, holding its payout steady even as it absorbed new taxes.

And the unregulated seller of electricity and natural gas was able to pull that off despite one of the more volatile markets in memory for energy.

That included a vicious decline in natural gas and electricity prices, which severely reduced the incentive of consumers and businesses to switch from utility default service to the company’s services.

Broadband cable television company Shaw Communications Inc (TSX: SJR/B, NYSE: SJR), meanwhile, has increased its dividend 16 times in the last decade.

And it looks set to announce another boost this month, probably when it releases fiscal 2012 first-quarter earnings on Jan. 12.

That’s testament to the strength and reliability of its underlying cable television business as well as management’s continuing ability to leverage that with expansion in broadband services and entertainment content. And with connectivity needs growing rapidly, so are opportunities for growth.

My goal for both stocks is robust total returns. The pair, however, offers somewhat different roads to get there. Just Energy’s primary appeal, for example, is a safe yield made stratospheric by investors’ overpricing of its risks. I’m adding Shaw to the Conservative Holdings primarily for its ability to generate consistent, strong dividend growth.

Shaw’s primary business is cable television service, which it provides to 3.4 million users. Its core asset, however, is its fiber network, supplemented by satellite direct-to-home connections and a nascent WiFi system. Management has elected to build the latter as a way to leverage its existing network and take advantage of the proliferation of wireless devices, without going to the expense of constructing its own wireless infrastructure.

The company generates high levels of free cash flow after capital expenditures, enabling it to pay hefty dividends as well as continue retiring high-cost debt that was the legacy of initial network construction. Last August, for example, Shaw was able to complete the retirement of all of its 13.5 percent senior notes due 2015. And some CAD550 million in expected free cash for fiscal 2012 should afford more such opportunities to slash interest costs, eliminate refinancing risk and even finance future growth.

The company also holds substantial programming assets. Its 18 specialty networks include the popular HGTV Canada (Home and Garden), Food Network Canada, History Television and Showcase.

These provide both a way to leverage Shaw’s existing network and marketing opportunities with rival networks. The company also operates a 7,000-title video-on-demand system and offers access to view every National Hockey League game.

Last month the company launched five new high-definition TV channels, including for SPACE, Business News Network, Bravo!, Discovery Channel and Animal Planet. It also inked a long-term distribution agreement with Rogers Communications Inc (TSX: RCI/B, NYSE: RCI).

Both moves enhance long-term profitability at little cost or risk, a hallmark of Shaw strategies that have consistently boosted shareholder value year after year.

I expect numbers released Jan. 12 to reflect continued strength in all areas. I’ll have a Flash Alert on what they mean next week. Meanwhile, it’s a great time to add Shaw Communications to your portfolio below USD22.

Just Energy shares have recovered sharply from their low point of USD8.82 reached Oct. 4, 2011. Much of that has come since mid-December, when management temporarily suspended its dividend reinvestment plan (available only to Canadians) and announced a plan to buy back up to 10 percent of its shares, with a limit of 25 percent of average daily volume on any trading day.

Management went on to say that shares “have been trading in a price range which does not adequately reflect their value in relation to Just Energy’s business and its future business prospects” and that purchases should be immediately accretive to earnings per share. CEO Ken Hartwick called the move “simple common sense,” given the company’s view that “our growth will meet or exceed our corporate objectives” for the current fiscal year.

The statements made were right in line with management’s comments throughout calendar 2011 regarding the safety of its dividend. It was, however, the company’s most significant move to date to back up its words with deeds, and the result has been a rise of roughly 20 percent for Just Energy shares over the last several weeks.

My view is we’re going to see a lot more in the coming months. For one thing, Just Energy’s yield of 10 percent-plus still clearly reflects investor fears of a dividend cut in calendar 2012, quite possibly a substantial one. That’s not happening so long as management is still delivering on its guidance.

We’ll learn a lot more on or about Feb. 10, when the company is slated to announce numbers for its fiscal 2012 third quarter. The keys will be maintaining profit margins and whether or not the company can add more customers than it loses to attrition. That’s going to be a bit more difficult than usual given the steep decline in natural gas prices during the fourth quarter.

Not only do low prices reduce the incentive to switch providers. They can also cut into margins for both gas and electricity, which is pegged to natural gas prices in many states.

Just Energy, however, has proven more than up to the task in recent quarters. There’s absolutely nothing to suggest they won’t do it again, and the job should indeed get easier later in the year as the company retires shares.

Just Energy also has the advantage of a very strong liquidity position. That’s in large part thanks to operating a business that doesn’t require large capital outlays, other than for completing acquisitions.

But the company has no debt maturities in 2012 and a CAD350 million credit line with only CAD63 million drawn. This line doesn’t expire until Dec. 31, 2013. It also has no significant debt maturities until 2017, by which time it should have ample opportunities for refinancing.

Those are facts that haven’t gone unnoticed by Bay Street, which has remained consistently upbeat on the company with five “buys,” two “holds” and no “sells.” Neither is it ignored by insiders, who are recent net buyers despite equity-based compensation. And so long as the business performs, it won’t be ignore by investors much longer, either.

As I’ve written again and again, I don’t believe in averaging down in any stock, no matter how attractive. No stock or company is fool-proof and we have to be ready to exit if the facts point us that way. The surest way to get tied down in a stock–both financially and emotionally–is to really load up on it. That’s the mistake I’m very afraid many made with Yellow Media Inc (TSX: YLO, OTC: YLWPF) last year, turning a blow-up stock into a real portfolio-wide disaster.

I’m bullish on Just Energy. But if you already own the stock in proportion to the rest of your portfolio, there’s no sense buying more. Instead, put your funds to work in my new recommendation, Shaw Group, which should do just as well with its combination of solid yield and dividend growth. New or underweighted investors can buy Just Energy up to USD16.

What can go wrong at these companies? For Just Energy, the keys are always to maintain profit margins and to attract more new customers than it loses to attrition. Both become a lot more challenging when natural gas prices fall, and take electricity prices down with them.

Thus far management has proven more than up to the task, with the strong fiscal 2012 second-quarter numbers reported in early November the latest evidence.

I’m also encouraged by the statement of Executive Chair Rebecca MacDonald last month that “not only are our current dividends sound but we do now see any circumstance which would constrain our ability to pay them in the future.”

It is undeniable, however, that this company would prefer an environment of stable to rising natural gas prices. And until prices do stabilize, I’ll continue to watch closely for any signs of deterioration that could force management to back track. Note also that Just Energy does occasionally face pressure from consumers and regulators in some of the states where it operates. That’s a part of doing business in any essential-service industry. Risk here is mitigated by the company’s geographic diversification, and management has proven itself adept at settling disputes, even in contentious states such as Illinois.

Much of the flat performance in Shaw’s shares the past couple years can probably be laid at the feet of management’s decision not to launch a full-scale wireless network to compete with the likes of BCE Inc (TSX: BCE, NYSE: BCE) and Telus Corp (TSX: T, NYSE: TU). The move not only deflated some investors’ expectations of company growth. But some took it as a sign of weakness, even inevitable decline.

Lingering uncertainty over the company’s long-run future is likely responsible for the split decision on Bay Street, where six analysts rate the stock a “buy,” eight a “hold” and three a “sell.” In my view, the decision to operate a targeted WiFi network instead is a wise one, focusing the company on operating its existing network well and maximizing opportunity there while avoiding massive capital expenditures for uncertain reward.

That, in effect, is what cable giants in the US have elected to do, selling their wireless spectrum to Verizon Communications (NYSE: VZ) in exchange for cash and access to networks for marketing services. And the result–as for Shaw–is reduced operating risk, a stronger balance sheet and better focus, which in the long run should more than offset any loss of growth from not competing full bore in wireless.

As in the US, many Canadian cable companies are still heavily owned by founding families. That’s definitely the case here, as three members of the Shaw family have seen the value of their shares grow to CAD1 billion from price appreciation alone. And those gains plus salaries and bonuses have triggered charges from some investor-activists and journalists that management is abusing its position to reward itself with excessive compensation.

For its part management fires back that no bonuses are received unless the company meets its financial targets–and that high levels of compensation reflect the fact it has consistently met those targets. Moreover, the interests of the Shaw family and the public are increasing intertwined due to the former’s heavy insider ownership.

It’s true the publicly traded “B” shares have no voting rights on executive pay at Shaw. That leaves little recourse to executive pay questions other than avoiding the company’s stock. In my view, there’s more than enough attraction to buying Shaw shares to offset executive pay questions. But this is an issue I will watch closely as long as we hold this stock.

In the meantime, this is a business with an exceptionally steady operating record that’s consistently proven its ability to weather tough economic environments. For example, Shaw raised its monthly dividend 11.1 percent in September 2008, just when the financial crisis was starting to break loose. And it announced another 5 percent boost on Jan. 15, 2009, when the rest of the world was trying to pick up the pieces.

That’s an exceptionally steady operating record to go with a solid yield and reliable dividend growth. And so long as management is able to keep delivering that, I don’t mind the slightly elevated pay scale for executives, which is actually somewhat paltry compared to what many US cable company manager/owners have taken in the past.

For more information on Shaw and Just Energy, go to How They Rate. Just Energy is tracked in the Gas/Propane group. Shaw is covered under Information Technology. Click on their US symbols to see all previous writeups in Canadian Edge and CE Weekly. 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 much larger than December’s High Yield of the Month picks, which should make it very easy to buy them either in Canada or in the US. Shaw is the larger, with a market capitalization of USD8.74 billion. Just Energy, however, is also a good sized company at CAD1.72 billion. Both trade with substantial volume on their home market, the TSX. Shaw trades on the New York Stock Exchange (NYSE) under the symbol SJR, while Just Energy trades in the US over-the-counter (OTC) market under the symbol JSTEF.

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 dividend in Canadian dollars. Appreciation in the loonie will raise dividends as well as the value of your shares.

Dividends of both companies are 100 percent qualified for US income tax purposes. Both are organized as corporations, so dividends paid into a US IRA are not subject to 15 percent Canadian withholding tax. Just Energy was an income trust prior to January 2011. But the first dividend actually paid in 2011 was declared Jan. 5, meaning all payments were made after the company had converted to a corporation.

Dividends paid by both companies to non-IRA accounts will be withheld at a rate of 15 percent from US investor accounts but can be recovered as a credit by filing a Form 1116 with your US income taxes. The amount of recovery allowed per year depends on your own tax situation. Canadian investors may be able to defer some of their tax burden as a return of capital.