A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, Enbridge Income Fund Holdings Inc (TSE:ENF) has paid dividends to shareholders, and these days it yields 6.7%. Let’s dig deeper into whether Enbridge Income Fund Holdings should have a place in your portfolio.
5 checks you should use to assess a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is it the top 25% annual dividend yield payer?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share amount increased over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
How does Enbridge Income Fund Holdings fare?
The current trailing twelve-month payout ratio for the stock is 34.3%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a higher payout ratio of 99.7%, leading to a dividend yield of 7.1%. However, EPS is forecasted to fall to CA$2.44 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. This also brings about uncertainty around the sustainability of the payout ratio.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Unfortunately, it is really too early to view Enbridge Income Fund Holdings as a dividend investment. It has only been consistently paying dividends for 7 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Enbridge Income Fund Holdings produces a yield of 6.7%, which is high for Oil and Gas stocks.
If Enbridge Income Fund Holdings is in your portfolio for cash-generating reasons, there may be better alternatives out there. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three key factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for ENF’s future growth? Take a look at our free research report of analyst consensus for ENF’s outlook.
- Valuation: What is ENF worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether ENF is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.