Yahoo Finance Enbridge (TSE:ENB) Is Increasing Its Dividend To CA$0.8875
Enbridge Inc. (TSE:ENB) will increase its dividend from last year's comparable payment on the 1st of June to CA$0.8875. This makes the dividend yield 6.6%, which is above the industry average.
View our latest analysis for Enbridge
Enbridge Is Paying Out More Than It Is Earning
A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, the company was paying out 290% of what it was earning. Without profits and cash flows increasing, it would be difficult for the company to continue paying the dividend at this level.
The next 12 months is set to see EPS grow by 181.0%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 114% over the next year.
Enbridge Has A Solid Track Record
The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of CA$1.13 in 2013 to the most recent total annual payment of CA$3.55. This means that it has been growing its distributions at 12% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.
Enbridge May Find It Hard To Grow The Dividend
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Enbridge has seen earnings per share falling at 3.5% per year over the last five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.
Enbridge's Dividend Doesn't Look Sustainable
Overall, we always like to see the dividend being raised, but we don't think Enbridge will make a great income stock. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would probably look elsewhere for an income investment.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. To that end, Enbridge has 4 warning signs (and 2 which are significant) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
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