August’s Best Buys feature a Portfolio newcomer and an old friend. Both offer a generous yield and substantial wealth-building power with modest risks.

The new addition is Brookfield Real Estate Services Inc (TSX: BRE, OTC: BREUF), a franchiser and network of real estate agents financially backed and managed by Brookfield Asset Management Inc (TSX: BAM/A, NYSE: BAM).

The old friend is oil and gas producer Vermilion Energy Inc (TSX: VET, OTC: VEMTF), a former income trust that’s returned more than 400 percent over the past eight years and has laid the groundwork for an even better showing the next eight.

We already own two Brookfield creations in the Canadian Edge Portfolio: Aggressive Holding Acadian Timber Corp (TSX: ADN, OTC: ACAZF) and Conservative Holding Brookfield Renewable Energy Partners LP (TSX: BEP-U, OTC: BRPFF). Both have proven to be reliable dividend payers, as much for Brookfield’s commitment as the stability of their cash flows.

The same is true for Brookfield Real Estate Services, which I’ve tracked in Canadian Edge since it was known as Royal Le Page Income Fund.

The company’s strategy is simple: attract and acquire residential property realtors across the Canada and add them to its network of franchisees, then collect a combination of fixed and variable fees.

Fixed fees currently account for 68 percent of revenue and are determined by the number of realtors in the network.

Variable fees, meanwhile, are driven by transactional dollar volume from sales commissions generated by network realtors.

Fixed fees aren’t directly impacted by market activity, though the number of realtors in the network will wax and wane with transactional volumes in the long haul. Variable fees, meanwhile, give it the ability to benefit from a healthy property market.

Both kicked in during the second quarter, as cash flow from operations (CFFO) rose to CAD0.57 per share from CAD0.53 the prior year. Rolling 12 month CFFO–the account from which dividends are paid–rose to CAD2 per share from CAD1.97 a year ago. The company also reports earnings per share, though they’re of limited utility analyzing this type of business.

Transactional dollar volume rose 10 percent, roughly a third from higher selling prices and the rest from home sale activity. Meanwhile, the company brought its total to 15,249 realtors operating under 412 franchise agreements from 662 locations, for a 22 percent share of the overall Canadian market by transactional volume.

Management’s full-year guidance predicts a “leveling off” of residential housing prices and unit sales in “many major markets.” That leaves room for upside if conditions wind up more bullish and keeps the company conservatively positioned to maintain balance sheet strength and dividends if they don’t.

Production growth is the primary driver of long-term wealth building in the oil and gas business. Vermilion’s second-quarter output rose 11 percent from last year, as it continues to execute on light oil development in Canada’s Cardium region as well as oil and gas production growth in Europe and Australia.

Oil and natural gas liquids (NGLs) now account for roughly 67 percent of overall production. This number is likely to increase in the second half of 2012, as the company further builds its Cardium output by drilling 40 new wells and follows through on a plan to shut in some of its Canadian gas.

Second-half exposure to North American natural gas will be just 15 percent of production and only a sliver of cash flow.

Meanwhile, the company continues to ramp up European gas production, where prices are five to six times what they are in North America.

Regional gas output will take a quantum leap forward starting in late 2014, as the Corrib field off the Irish coast starts up.

Executing production plans takes a strong balance sheet. And with net debt-to-cash flow at just 0.9-to-1, Vermilion measures up well to an industry average of 2.1-to-1.

Financial power is further enhanced by the conservative distribution payout ratio, which allows cash flow to cover almost all capital spending as well.

Other key European countries are France and the Netherlands. And the company has a sizeable operation in Australia as well, which sells into the even higher-priced Asian gas and oil market. That adds up to nearly 40,000 barrels of oil equivalent current productions, with a clear path to ramping up output to some 50,000 barrels of oil equivalent from the existing asset base alone in the next couple years.

That’s a gain of more than 25 percent even before Corrib. And it could prove conservative if France’s Minister of Industry follows through on statements to end the ban on hydraulic fracturing. That law has up to now prevented the development of the company’s position in a major shale oil play in the country. The government is allegedly studying modifying that ruling as a way to pump up job growth.

What can go wrong at these companies? For Brookfield Real Estate Services the worst-case scenario would clearly be a meltdown of the Canadian residential real estate market. And, to be sure, there’s no shortage of local analysts and commentators predicting a decline in property values, and trading activity.

Comparing Canada’s residential market with the US prior to 2007, however, is simply ludicrous. For one thing, Canadian homebuyers don’t enjoy a mortgage tax deduction, while banks’ lending standards are much higher than they’ve been in the US in decades. Putting down 20 percent is a necessity, and there is no subprime lending.

As a result the vast majority of urban housing is apartments rather than single-family homes. Values of inner city condominiums have surged particularly in places such as Toronto, which has seen average home prices rise by roughly a third in the past five years.

But there’s little evidence of speculative flipping, and particularly not on the scale of what was going on in the US.

Moreover, Finance Minister Jim Flaherty has been moving aggressively to limit affordability of condos, presumably to curb any speculative urges.

A prolonged slump in Canadian residential real estate values and trading activity would hurt the 32 percent of revenue that’s variable. And if conditions got bad enough it could suffer a drop in realtor franchisees, whose steady fees provide the other 68 percent.

There’s no evidence anything like that is happening now, however. In fact, indications are Brookfield Real Estate Services’ royalties will continue to climb steadily, as prices and activity inch ahead at a low single-digit clip.

Meanwhile, the renewal rate for franchisees is ahead of 99 percent, even as the company continues to add new agent with acquisitions and organic expansion. And there’s the financial backing of Brookfield Asset Management itself, which manages the company and its royalty streams.

Even if conditions do get a bit more rough for Brookfield Real Estate Services and Canadian residential property in general, the stock’s 9 percent-plus yield is pricing in a great deal of bad news already. And if things turn out a bit better than the doomsayers think that value means upside.

As for Vermilion, the key risks are a possible collapse in oil and natural gas prices globally as well as potential technical problems that could further delay or derail production from the Corrib gas field off the Irish coast.

Developed by a consortium of major producers, Corrib promises to boost the company’s overall output by a third almost overnight by 2015 but has required substantial outlays of capital in the meantime.

The good news is the company has now accounted for the final USD135 million payment for the field, which is due in December. All key regulatory approvals needed for development have been achieved, with no open appeals outstanding. And necessary tunneling equipment is on track to be available during the fourth quarter, with initial production at Corrib set for late 2014.

That should limit the risk of further delays, though it’s still two years-plus before the cash will start to flow from the field.

As for energy price risk, the company estimates that 82 percent of its output is tied to oil prices, more than half of that to Brent crude.

That’s limited the damage from crashing North American gas prices and price differentials between Canadian and US crude in recent months, which has wreaked havoc on many rivals.

So has the fact that some two-thirds of current output is sold in Europe and Australasia, where gas prices are multiples higher than in North America.

No energy producer can ever be wholly immune from energy price volatility in the long pull.

But these strengths did keep Vermilion’s second-quarter cash flows flat with last year’s, a stark contrast with the steep declines felt by rivals whose business is all in North America.

And they were key to the company’s ability to hold its dividend level throughout the 2008-09 meltdown as well, when oil crashed from over USD150 to barely USD30 a barrel in just a few weeks.

In short, both of these stocks are run conservatively enough to minimize even the unavoidable risks in their industries. That doesn’t guarantee against disaster, and we still have to look at the numbers each quarter.

But at least at this point Vermilion looks set to generate explosive returns the next eight years, just as it has for the eight we’ve had it in the Portfolio. Buy Vermilion Energy up to USD50 if you haven’t yet.

The newcomer to the Portfolio is also on track to repeat a history of gains since inception. Buy Brookfield Real Estate Services up to USD14.

For more information on Brookfield Real Estate Services, go to How They Rate under Financial Services. Vermilion is tracked under Oil and Gas. 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.

Vermilion is a mid-sized company with a market capitalization of CAD4.7 billion. There’s plenty of liquidity on both sides of the border and management has reportedly considered listing on the New York Stock Exchange (NYSE).

Brookfield Real Estate Services is a good bit smaller at just CAD113.9 million. It would likely be more easily purchased directly on the TSX but appears to trade sufficiently in the US under its over-the-counter (OTC) symbol BREUF. Ditto Vermilion under its VEMTF OTC symbol.

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 of both companies are 100 percent qualified for US income tax purposes. Both are former income trusts. Brookfield Real Estate Services converted in January 2011, while Vermilion made the jump in September 2010. Vermilion maintained its trust dividend at conversion. Brookfield Real Estate Services cut its monthly payout by 21.4 percent, roughly the amount of taxes it absorbed.

Canadian investors enjoy favorable tax status for both companies, as they do for all Canadian corporations. For US investors dividends paid by either company into a US 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.