Enbridge (TSE:ENB) Will Pay A Larger Dividend Than Last Year At CA$0.9425

The board of Enbridge Inc. (TSE:ENB) has announced that it will be paying its dividend of CA$0.9425 on the 1st of March, an increased payment from last year's comparable dividend. This takes the annual payment to 6.4% of the current stock price, which is about average for the industry.

View our latest analysis for Enbridge

Estimates Indicate Enbridge's Could Struggle to Maintain Dividend Payments In The Future

Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, the company wasn't making enough to cover what it was paying to shareholders. 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 3.2%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 135%, which probably can't continue without putting some pressure on the balance sheet.

Enbridge Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the dividend has gone from CA$1.40 total annually to CA$3.77. This implies that the company grew its distributions at a yearly rate of about 10% over that duration. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Enbridge hasn't seen much change in its earnings per share over the last five years. The company is paying out a lot of its profits, even though it is growing those profits pretty slowly. 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.

Enbridge's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think Enbridge's payments are rock solid. Although they have been consistent in the past, we think the payments are a little high to be sustained. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've identified 3 warning signs for Enbridge (2 are a bit concerning!) that you should be aware of before investing. 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.