Stronger commodity prices should keep all things Canadian on the upside in 2010. The approaching end game on trust conversions to corporations, however, will likely have the greatest influence on share prices in the near term.

A majority of investors on both sides of the border still wrongfully assume that 2011 taxation spells doomsday for all remaining income trusts, great and small.

Despite an inauspicious beginning, 2009 turned out to be a banner year for the Canadian Edge Portfolio, with the Conservative Holdings returning 65 percent and the Aggressive Holdings 66 percent.

Where underlying businesses have remained strong, converting trusts have elected to avoid cutting distributions. Conversely, trusts bashed by the recession have basically used the excuse of converting to slash their payouts.

Ironically, the Canadian edge is even greater after taking into consideration the gains former trusts have realized after formally converting into corporations.

Can well-run trusts and high-dividend-paying corporations extend these gains, or are we headed for an inevitable relapse and retracement along the lines of late 2008?

No matter what happens in Canadian politics, however, investor returns will still depend mainly on the health of underlying businesses. The good news: The future still looks bright for well-run Canadian trusts and high-yielding corporations.

Canadian Edge Portfolio picks are up an average of 34.3 percent thus far in 2009. That’s against a 17 percent gain for the broad-based S&P/Toronto Stock Exchange Income Trust Index.

Market reaction to no-cut conversions has been highly favorable, particularly compared to conversions with dividend cuts. I detect two clear reasons for this. One is investors like dividends. And while trusts that have cut during their conversions have eventually attracted more growth-focused investors, the cuts have initially triggered a disruptive mass exodus from their shares.

The universe of Canadian trusts and high-yielding corporations is still on the bargain counter. Despite some herculean market moves, the bar of expectations is still very low, even for businesses that, quarter after quarter, are proving more than a match for still-abysmal overall conditions.