Interested In Enbridge's (TSE:ENB) Upcoming CA$0.915 Dividend? You Have Four Days Left

Enbridge Inc. (TSE:ENB) is about to trade ex-dividend in the next 4 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Accordingly, Enbridge investors that purchase the stock on or after the 14th of May will not receive the dividend, which will be paid on the 1st of June.

The company's next dividend payment will be CA$0.915 per share, and in the last 12 months, the company paid a total of CA$3.66 per share. Calculating the last year's worth of payments shows that Enbridge has a trailing yield of 7.2% on the current share price of CA$51.15. If you buy this business for its dividend, you should have an idea of whether Enbridge's dividend is reliable and sustainable. As a result, readers should always check whether Enbridge has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Enbridge

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Enbridge distributed an unsustainably high 125% of its profit as dividends to shareholders last year. Without extenuating circumstances, we'd consider the dividend at risk of a cut. A useful secondary check can be to evaluate whether Enbridge generated enough free cash flow to afford its dividend. Over the last year, it paid out more than three-quarters (82%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

It's good to see that while Enbridge's dividends were not covered by profits, at least they are affordable from a cash perspective. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Very few companies are able to sustainably pay dividends larger than their reported earnings.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see Enbridge's earnings per share have risen 13% per annum over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Enbridge has increased its dividend at approximately 11% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Should investors buy Enbridge for the upcoming dividend? Enbridge has been growing its earnings per share nicely, although judging by the difference between its profit and cashflow payout ratios, the company might have reported some write-offs over the last year. Overall we're not hugely bearish on the stock, but there are likely better dividend investments out there.

So if you want to do more digging on Enbridge, you'll find it worthwhile knowing the risks that this stock faces. Every company has risks, and we've spotted 3 warning signs for Enbridge (of which 1 is significant!) you should know about.

If you're in the market for strong dividend payers, we recommend checking 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.