“One conservative, one aggressive” is the theme for the February Best Buys. From the Conservative Holdings is real estate investment trust Artis REIT (TSX: AX-U, OTC: ARESF).

Artis rates a perfect “6” under the CE Safety Rating System, matching reliable revenue with superior debt and operating metrics. The REIT’s most recent demonstration of strength was the December upsizing of an equity offering from CAD50 million to CAD62.8 million. That’s low-cost capital to deploy for acquisitions and other development.

Five years ago Artis was basically an Alberta-focused property owner, with a primary distinguishing feature of commercial rents that were far below market that could therefore be reliably increased as leases came up for renewal.

The crash of 2008 hit Canada’s energy patch hard, as oil slid from north of USD150 a barrel to barely USD30 in a matter of weeks.

That raised the fear level concerning Artis’ cash flows and distribution safety. The unit price crashed from around USD15 in early October to a low of USSD3.61 on Dec. 5, 2008.

It soon became apparent, however, that management had prepared the company well for the downturn.

And while rivals floundered and even failed, Artis was able to continue to raise rents and maintain high renewals and low vacancy rates.

By mid-2009 the unit price was well on the road to recovery, and management turned its attention back to expansion, taking advantage of rivals’ weakness.

Today Artis controls commercial leasable property totaling 23.4 million square feet in 220 locations. Revenue has grown 171 percent since 2009 and is on a similar pace for 2013 as management executes on its substantial acquisition pipeline.

As for protection from a future property downturn–as some project for Canada this year–Artis’ operations are also more diversified than ever, with cash flow insulated both operationally and geographically against sector or regional setbacks. Some 49.6 percent of the portfolio is industrial, 32.1 percent is office and the rest is retail.

As for geography, Alberta is still important but is down to just 25.7 percent of the total portfolio. Meanwhile, the US now accounts for the largest single piece, with 29.9 percent, with Ontario at 16 percent, Manitoba 15.4 percent, British Columbia 7.9 percent and Saskatchewan 5.1 percent.

Those percentages are constantly shifting as the company does more deals. The latest to close, financed by the recent equity offering, was for CAD44.9 million of industrial and retail properties in Toronto and Saskatoon, Saskatchewan. That was followed by the announcement of agreements to purchase a pair of Alberta retail properties for CAD47.3 million, one of which has now closed with the other expected to be finalized by July 1.

Artis currently trades at just book value and with a yield that’s among the highest of the Canadian REITs in the How They Rate coverage universe. I expect that to change with a vengeance when the REIT resumes raising distributions later this year. That should add up to a solid capital gain in addition to the generous yield.

My pick this month from the Aggressive Holdings is Just Energy Group Inc (TSX: JE, NYSE: JE). The energy marketer reported another quarter of growth for the three months ended Dec. 31, 2012, as it boosted its customer rolls by 11 percent and continued to broaden its product reach.

Funds from operations, however, dropped 25 percent on a 0.6 percent decline in revenue, and gross margins per share slipped 4.8 percent.

That pushed the payout ratio based on funds from operations up to 114.8 percent for the quarter.

Nine-month sales and margins, meanwhile, lagged behind fiscal year 2012 levels, pushing the fiscal year-to-date payout ratio based on funds from operations to 172 percent.

Just Energy’s earnings were affected by weaker results at the ethanol business and what management called a “challenging commodity environment” that affected revenue.

Margins, meanwhile, are being affected by the strategy announced last quarter that essentially involves higher administrative and marketing costs to gain business that will generate higher returns over the next few years.

Management had given the indication in previous reporting periods that it could fund this growth and still pay the current dividend rate. This week, however, it shifted course, announcing it would reduce the fiscal year 2014 dividend to a monthly rate of CAD0.07 per share. The change is effective with the April 30 payment. The current monthly rate of CAD0.10333 will remain in force through the end of the fiscal year on March 31.

The dividend cut isn’t likely to make too many investors happy, nor should it. Over the longer term, however, this looks like the right move for a company that’s still growing its business but currently faces some considerable headwinds in the markets.

The company will be able to cover the post-cut dividend with funds from operations in fiscal 2014. And the move will free up cash to spend on expansion plans, build up the cash reserve and pay down debt as it matures rather than rolling it over.

Management cites “embedded margin” of CAD15.19 per share as evidence of the company’s true value, a figure that has consistently grown. And even at the new dividend rate that begins in April, the stock still yields roughly 8.5 percent as of the close of trading on Feb. 7. And management projects fiscal 2015 funds from operations to cover the dividend within a target range of 60 to 65 percent.

Just Energy doesn’t speculate on energy prices. It locks in margins with fixed-price contracts for the power and gas it buys and sells.

But it is exposed to prices in one very real way: Consumers and businesses are by nature much less inclined to lock in a contract to buy energy when prices are already low.

For the past few years rock-bottom natural gas prices have held down electricity prices as well. That’s led to increasing speculation that Just Energy and other marketers would have to sacrifice margins to renew customers and to replace those lost to attrition.

Despite the weaker bottom-line numbers in the fiscal third quarter, however, that still doesn’t appear to be a problem for this company. Just Energy’s units added 341,000 new customers during the fiscal third quarter and renewed another 203,000. That more than offset the loss of 241,000 customers to attrition, a figure that was up from 195,000 a year ago on a smaller base but down from the second quarter’s 297,000.

Attrition rates remain worst in the natural gas business in the US and Canada, with 39,000 in lost customers and 49,000 in non-renewers.

That’s a business the company has been slowly cutting back, however. More important, electricity business growth more than made up for that, with 274,000 new users nearly doubling losses.

As for profitability per customer, gas margin was weakest, dropping 21 percent from year-earlier levels.

But again electricity picked up the slack, thanks to greater scale via a 19 percent boost in customers and renewable energy product growth, offset partly by lower margins per customer in the commercial book.

Residential customer margins remained very high, while commercial margins were still double the cost of acquiring new business despite tougher competition.

Encouragingly, the cost of adding, or “aggregating,” residential customers dropped 22 percent, while commercial costs were off slightly. Management continues to bring down acquisition costs by using multiple channels and utilizing economies of scale that come with its strong customer growth.

Meanwhile, the National Home Services unit enjoyed a 32 percent jump in gross margin and 21 percent higher cash flow, providing another customer-based source of revenue and diversification from energy.

Administrative costs per customer were up 6.3 percent, largely on expansion efforts, but are on track to decline 11 percent in fiscal 2014. And bad-debt expense dropped 25 percent, as the company reduced exposure to markets where it has credit risk as a percentage of the overall business. The ratio of bad debt to relevant sales also declined to 2.1 percent from 2.5 percent a year earlier.

Through the first nine months of fiscal 2013 gross margin and adjusted cash flow growth are up 9 percent and down 6 percent, respectively. That again is in large part a function of the growth strategy as well as external factors such as energy prices.

And though the fourth quarter is traditionally a strong one, current trends are likely to hold, meaning Just Energy is likely to miss its growth targets. The company, for example, offered no estimate of when the ethanol business margins might bounce back.

On the other hand, margin growth should still come in around 8 percent for the year. And, as the company noted at the time, the CAD105 million financing done in December 2012 should fund growth as planned until margins from ongoing expansion reach target in fiscal 2015.

Moreover, cutting the dividend will provide additional cash to pay down debt this year. It may eventually win some friends on Bay Street, where analysts have long criticized the policy of paying out such a large amount in dividends rather than paying down debt.

One thing has changed, however. The dividend cut means Just Energy no longer earns such a high buy target. I’m cutting it to USD11 for those who don’t already own the stock.

What could go wrong at these companies? We’ve now seen it at Just Energy in the form of the dividend cut, brought on by weak market conditions and the company’s aggressive expansion plans.

But the key question here is, does this company have the ability to build wealth for shareholders as a growing business? Despite the weaker numbers and even the dividend reduction, that still seems to be the case.

Earlier this week, for example, Just Energy inked a supply agreement for its growing United Kingdom business with Shell Energy Europe. Shell will be the company’s wholesale supplier, ensuring Just Energy will have the liquidity to expand its contract-based retail energy business there. It’s also a deepening of the Just Energy-Shell relationship that dates back to 1997, when Shell began servicing the company’s needs in Ontario, Canada.

The UK won’t be a huge part of overall revenue for some time. But the ability to successfully expand outside North America with such a blue-chip partner clearly demonstrates management has its eye on the ball. And over time global diversification will also reduce exposure to the ups and downs of markets on this continent.

I fully expect to see Just Energy’s share price dip over the next few days, as investors sort out what this news means.

But so long as business is growing I’ll be staying with the company in the Aggressive Holdings. In fact I’m confident we’ll eventually see a return to dividend growth.

As a REIT, Artis’ rents and property values are exposed to economic ups and downs.

Management proved its skill navigating a very tough environment in 2008, which hit its core Alberta market particularly hard.

The keys then were the focus on high-quality tenants, below-market rents and long-term leases, with expirations staggered over several years.

Those are still Artis’ policies now, and management has further protected cash flow with geographic diversification the past few years.

The REIT has also strengthened its balance sheet, refinancing debt and pushing out maturities to eliminate refinancing risk. The next significant maturity is a 5.75 percent convertible that comes due June 30, 2018. And the company has been able to finance on a property basis on favorable terms as well.

Ultimately, the greatest risk at Artis is a management misstep with an acquisition. The company has an active pipeline, completing USD289 million in deals in 2012 with targets in the US as well as Canada. And making sure these asset additions generate targeted returns will continue to require uncommon management discipline. The US business also requires the REIT to exercise strong cash management, particularly when it comes to currency risk.

If management does falter, we’ll notice it in rising vacancy rates and slipping profit margins, even as revenue rises. Our next chance to review the numbers will be Feb. 28 when fourth-quarter and full-year 2012 earnings are released.

At this point, however, there’s no reason to expect anything but favorable news, which should bring Artis closer to its first distribution increase since June 2008. Yielding nearly 7 percent already, Artis is a buy up to USD16 for those who don’t already own it.

For more information on Artis REIT, go to How They Rate under Real Estate Trusts. Just Energy is tracked under Gas/Propane. 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 are mid-sized companies. Artis’ market capitalization comes in at around CAD1.8 billion, while Just Energy’s is CADD1.4 billion. Both stocks have plenty of liquidity on both sides of the border, both in TSX and US-listed symbols. Artis trades in the US over-the-counter under the symbol ARESF. Just Energy trades on the New York Stock Exchange (NYSE) under the symbol JE.

Both companies have decent coverage on Bay Street and Wall Street. Artis has nine analysts tracking it, with six rating the units a “buy” and three “hold” with no “sells.”

Just Energy is viewed less favorably at present, with three of the six analysts tracking the stock rating it “sell,” versus two “holds” and one “buy” recommendation. That may change, however, given the earnings report and news on the dividend.

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 both companies are 100 percent qualified for US income tax purposes. Both stocks’ 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 both companies. For US investors, dividends paid by Just Energy 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. Artis is a REIT paying no corporate tax, so withholding tax may still apply to IRAs.

Dividend taxes withheld from US non-IRA accounts 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.