Yahoo Finance Enbridge's (TSE:ENB) Dividend Will Be Increased To CA$0.915
Enbridge Inc. (TSE:ENB) has announced that it will be increasing its dividend from last year's comparable payment on the 1st of March to CA$0.915. This takes the dividend yield to 7.8%, which shareholders will be pleased with.
See our latest analysis for Enbridge
Enbridge Doesn't Earn Enough To Cover Its Payments
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 125% of what it was earning and 83% of cash flows. This indicates that the company could be more focused on returning cash to shareholders than reinvesting to grow the business.
Earnings per share is forecast to rise by 36.6% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 105%, which probably can't continue without putting some pressure on the balance sheet.
Enbridge Has A Solid Track Record
The company has an extended history of paying stable dividends. The dividend has gone from an annual total of CA$1.26 in 2014 to the most recent total annual payment of CA$3.66. This means that it has been growing its distributions at 11% 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.
Dividend Growth Could Be Constrained
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Enbridge has grown earnings per share at 13% per year over the past five years. Although per-share earnings are growing at a credible rate, the massive payout ratio may limit growth in the company's future dividend payments.
Our Thoughts On Enbridge's Dividend
Overall, we always like to see the dividend being raised, but we don't think Enbridge will make a great income stock. 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 don't think Enbridge is a great stock to add to your portfolio if income is your focus.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 3 warning signs for Enbridge (of which 1 is concerning!) you should know about. 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.
