Enterra Energy Trust (NYSE: ENT) closed last Friday at $8.12, up fifteen cents for the day and far above its a 52-week low of $6.68. While $1.44 would be a nice profit from that November 2006 low, it had been as high as $19.50 last January 2006.

The AOL Money & Finance Profile reads: Enterra Energy Trust trusts in the energy interred in geological strata. Through subsidiaries the trust acquires interests in petroleum and natural gas properties. Its principal operating subsidiary is Enterra Energy Corp., which explores for and produces oil, natural gas, and natural gas liquids in Western Canada (primarily in the Peace River Arch area). The trust's interests in crude oil and natural gas assets are held through Enterra Energy Corp., Rocky Mountain Acquisition Corp., and Rocky Mountain Gas Inc. Rocky Mountain Gas holds gas assets in Montana and Wyoming. The trust's proved and probable reserves are 19 million barrels of oil equivalent (boe), and its production averages 6,300 boe per day.

Earlier last week one of our readers brought ENT to my attention because James Cramer had recommended it a few months ago. I was floored when I took a brief look at the company and saw that Enterra Energy Trust is paying an 18.07% yield. That is very remarkable even to the 'untrained eye' - think novice investor. How long could that yield hold up? What is the rest of the story?

The ten-year chart above indicates that there was quite a lot of optimism about ENT the first 18 months of its public life, but that was followed by an internet bubble-type collapse from a high near $127.00 in late 1999. Its share price continued to deteriorate with from 2000 to 2002 after which it spent the last few years in a trading range between $5.00 and $10.00.

It is very tempting to see the 18% return as a thing to marvel and buy this stock up while it is out of favor, supported further by Cramer's comments and others. Looking at its balance sheet for the last five years (through 2005) I noticed that the accounts receivable have been less than accounts payable four of those years and last year continued along that path.

The stock has taken a hit because of lower natural gas prices, lower oil prices, and the Canadian Government threatening to raise taxes on such trusts, which has since been put on the back burner. So while buying Enterra near its bottom with a very high yield is tempting, what are the risks?

The high yield, which in part stems from the falling stock price, seems like it would be hard to maintain from a cash flow standpoint. If it is cash flow negative, reducing the dividend is the easiest way to rectify the situation. The imbalance aside, it seems to me it could reduce the interest dividend just based on the gap between the ENT payout rate and any other opportunity. Treasuries, Certificates of Deposit, corporate bonds, junk bonds, and preferred stocks are generally paying between 4% and 9% based on a cursory view. A 25% reduction to the 14% to 15% level would still provide a healthy return in comparison.

If you are considering Enterra for investment think about your risk / reward proposition. How much could you afford to risk that would actually matter. If you view this potential investment as high risk, than does it make sense to put a lot of money into it? But if you do not put a lot of money into it than does it matter at all since you will not be positively affecting your overall return much. One could argue that since it is so close to its lows, your downside is somewhat protected, and even a lower dividend yield would make it worth while should the stock just continue to meander for the next few years.

I'm still thinking about this one. I'm not in a hurry. Anyone wishing to share any other perspectives on Enterra would be welcome.

Check out my other posts for BloggingStocks here.

Sheldon Liber is the CEO of a small private investment company and the vice president for design and research at an architecture & planning firm.