Enbridge (TSE:ENB) Is Paying Out A Larger Dividend Than Last Year

Enbridge Inc.'s (TSE:ENB) dividend will be increasing from last year's payment of the same period to CA$0.9425 on 1st of March. This takes the annual payment to 5.9% of the current stock price, which is about average for the industry.

Check out our latest analysis for Enbridge

Enbridge's Projections Indicate Future Payments May Be Unsustainable

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. 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 3.1%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 135% over the next year.

Enbridge Has A Solid Track Record

The company has an extended history of paying stable dividends. Since 2014, the annual payment back then was CA$1.40, compared to the most recent full-year payment of CA$3.66. This means that it has been growing its distributions at 10% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Unfortunately, Enbridge's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. The earnings growth is anaemic, and the company is paying out 123% of its profit. As they say in finance, 'past performance is not indicative of future performance', but we are not confident a company with limited earnings growth and a high payout ratio will be a star dividend-payer over the next decade.

The Dividend Could Prove To Be Unreliable

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 be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Case in point: We've spotted 3 warning signs for Enbridge (of which 2 can't be ignored!) you should know about. Is Enbridge not quite the opportunity you were looking for? Why not check out our selection of top 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.