Enbridge's (TSE:ENB) Upcoming Dividend Will Be Larger Than Last Year's
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$0.8875. This takes the dividend yield to 6.6%, which shareholders will be pleased with.
Check out our latest analysis for Enbridge
Enbridge Doesn't Earn Enough To Cover Its Payments
If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, the company's dividend was much higher than its earnings. It will be difficult to sustain this level of payout so we wouldn't be confident about this continuing.
The next 12 months is set to see EPS grow by 23.2%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 113%, 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$1.13 in 2013 to the most recent total annual payment of CA$3.55. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
There Isn't Much Room To Grow The Dividend
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Enbridge has impressed us by growing EPS at 6.3% 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.
The Dividend Could Prove To Be Unreliable
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 don't think Enbridge is a great stock to add to your portfolio if income is your focus.
Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Taking the debate a bit further, we've identified 2 warning signs for Enbridge that investors need to be conscious of moving forward. 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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