Enbridge (TSE:ENB) Has Announced That It Will Be Increasing Its Dividend 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 will take the dividend yield to an attractive 7.9%, providing a nice boost to shareholder returns.

View 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. Based on the last payment, the dividend made up 86% of cash flows, but a higher proportion of net income. While the cash payout ratio isn't necessarily a cause for concern, the company is probably focusing more on returning cash to shareholders than growing the business.

Over the next year, EPS is forecast to expand by 136.2%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 116%, 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 annual payment during the last 10 years was CA$1.26 in 2014, and the most recent fiscal year payment was 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 seen EPS rising for the last five years, at 8.1% per annum. Although per-share earnings are growing at a credible rate, the massive payout ratio may limit growth in the company's future dividend payments.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Enbridge's payments are rock solid. 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.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Case in point: We've spotted 5 warning signs for Enbridge (of which 1 shouldn't be ignored!) 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.