The Facts (as of May 3, 2012)
Share price: $17.96. Book value per share: $18.30. Market cap: $3.57 billion (large). Distribution: $0.1825 per month or $2.19 per year. Current yield: 12.2%. Debt/equity ratio:0.277. Payout ratio 355%. P/E: 29.7.
Enerplus is an independent North American energy company with a diversified asset base of oil and gas properties across a variety of resource plays. We are focused on creating value for our investors by providing organic growth in production and reserves complemented by a monthly dividend.
I sold Canfor Pulp and was looking for a company with a high yield to replace the lost income. I chose Enerplus, and I’m starting to think I made a mistake.
The current yield is over 12%. If the share price were to remain stable or rise, it would provide a very good return. The share price is currently 40% lower than a year ago.
The payout ratio is far too high. The company lost money during the last quarter. This is likely due to historically very low natural gas prices. Many institutional investors seem to be negative about this company.
I’m going to hold this for now, because the share price looks as if it was about to grow. It didn’t do any worse than the market over the past week, but I will be actively looking for a better income-producing option. I really don’t feel comfortable betting that the natural gas price will rise over the summer.