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Read This Before Considering Enerplus Corporation (TSE:ERF) For Its Upcoming CA$0.01 Dividend

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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Enerplus Corporation (TSE:ERF) is about to go ex-dividend in just four days. You can purchase shares before the 25th of February in order to receive the dividend, which the company will pay on the 15th of March.

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. Looking at the last 12 months of distributions, Enerplus has a trailing yield of approximately 2.1% on its current stock price of CA$5.62. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Enerplus can afford its dividend, and if the dividend could grow.

View our latest analysis for Enerplus

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Enerplus paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

historic-dividend
historic-dividend

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. Enerplus reported a loss last year, but at least the general trend suggests its income has been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Enerplus's dividend payments per share have declined at 25% per year on average over the past 10 years, which is uninspiring.

We update our analysis on Enerplus every 24 hours, so you can always get the latest insights on its financial health, here.

Final Takeaway

Should investors buy Enerplus for the upcoming dividend? We think this is a pretty attractive combination, and would be interested in investigating Enerplus more closely.

While it's tempting to invest in Enerplus for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 3 warning signs for Enerplus you should know about.

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.

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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.