Yahoo Finance Should You Buy Enerplus Corporation (TSE:ERF) For Its Upcoming Dividend In 4 Days?
Readers hoping to buy Enerplus Corporation (TSE:ERF) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You will need to purchase shares before the 29th of January to receive the dividend, which will be paid on the 14th of February.
Enerplus's next dividend payment will be CA$0.01 per share, on the back of last year when the company paid a total of CA$0.12 to shareholders. Based on the last year's worth of payments, Enerplus stock has a trailing yield of around 1.6% on the current share price of CA$7.3. If you buy this business for its dividend, you should have an idea of whether Enerplus's dividend is reliable and sustainable. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
See our latest analysis for Enerplus
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Enerplus paid out just 6.8% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. A useful secondary check can be to evaluate whether Enerplus generated enough free cash flow to afford its dividend. It paid out more than half (58%) of its free cash flow in the past year, which is within an average range for most companies.
It's positive to see that Enerplus's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Enerplus's earnings have been skyrocketing, up 49% per annum for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Enerplus has seen its dividend decline 25% per annum on average over the past ten years, which is not great to see. Enerplus is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.
To Sum It Up
From a dividend perspective, should investors buy or avoid Enerplus? Earnings per share have grown at a nice rate in recent times and over the last year, Enerplus paid out less than half its earnings and a bit over half its free cash flow. There's a lot to like about Enerplus, and we would prioritise taking a closer look at it.
Wondering what the future holds for Enerplus? See what the four analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
