Enbridge (TSE:ENB) Will Pay A Larger Dividend Than Last Year At CA$0.915

Enbridge Inc.'s (TSE:ENB) dividend will be increasing from last year's payment of the same period to CA$0.915 on 1st of March. This takes the dividend yield to 7.7%, which shareholders will be pleased with.

View our latest analysis for Enbridge

Enbridge Is Paying Out More Than It Is Earning

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, the company's dividend was higher than its profits, and made up 86% of cash flows. This indicates that the company could be more focused on returning cash to shareholders than reinvesting to grow the business.

Over the next year, EPS is forecast to expand by 81.3%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 152%, which probably can't continue without putting some pressure on the balance sheet.

historic-dividend

Enbridge Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2013, the dividend has gone from CA$1.26 total annually to CA$3.66. This means that it has been growing its distributions at 11% per annum over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. Enbridge has impressed us by growing EPS at 8.1% per year over the past five years. However, the company isn't reinvesting a lot back into the business, so we would expect the growth rate to slow down somewhat in the future.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. We would probably look elsewhere for an income investment.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 5 warning signs for Enbridge you should be aware of, and 1 of them shouldn't be ignored. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.