Enerplus’ PE Ratio is Deceptive

The quoted PE Ratio of Enerplus (ERF.TO) is around 43, which is far above the level at which I would normally hold a stock. However, Enerplus is different. Unlike most companies that record their earnings and then pay out a portion as a quarterly dividend, Enerplus pays a monthly dividend to its shareholders that is taken before earnings are calculated.

To calculate a fair and comparative PE Ratio for Enerplus we must calculate:

Price per Share / (Earnings per Share + Annual Dividend) = $31.26 / ($0.72 + $2.16) = 10.9

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