EnLink Midstream (NYSE:ENLC) Has Affirmed Its Dividend Of $0.1325

EnLink Midstream, LLC (NYSE:ENLC) will pay a dividend of $0.1325 on the 14th of May. Based on this payment, the dividend yield will be 3.9%, which is fairly typical for the industry.

View our latest analysis for EnLink Midstream

EnLink Midstream's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Based on the last payment, EnLink Midstream's profits didn't cover the dividend, but the company was generating enough cash instead. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

Over the next year, EPS is forecast to expand by 86.1%. Under the assumption that the dividend will continue along recent trends, we think the payout ratio could be 56% which would be quite comfortable going to take the dividend forward.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of $0.72 in 2014 to the most recent total annual payment of $0.53. Doing the maths, this is a decline of about 3.0% per year. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth Could Be Constrained

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that EnLink Midstream has been growing its earnings per share at 57% a year over the past five years. While EPS is growing rapidly, EnLink Midstream paid out a very high 114% of its income as dividends. If earnings continue to grow, this dividend may be sustainable, but we think a payout this high definitely bears watching.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about EnLink Midstream's payments, as there could be some issues with sustaining them into the future. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 3 warning signs for EnLink Midstream you should be aware of, and 1 of them is concerning. 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.