Read This Before Considering EnLink Midstream, LLC (NYSE:ENLC) For Its Upcoming US$0.094 Dividend

By
Simply Wall St
Published
July 24, 2021
NYSE:ENLC
Source: Shutterstock

EnLink Midstream, LLC (NYSE:ENLC) is about to trade ex-dividend in the next four days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase EnLink Midstream's shares before the 29th of July in order to receive the dividend, which the company will pay on the 13th of August.

The company's next dividend payment will be US$0.094 per share, and in the last 12 months, the company paid a total of US$0.38 per share. Looking at the last 12 months of distributions, EnLink Midstream has a trailing yield of approximately 6.7% on its current stock price of $5.63. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

See our latest analysis for EnLink Midstream

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. EnLink Midstream lost money last year, so the fact that it's paying a dividend is certainly disconcerting. There might be a good reason for this, but we'd want to look into it further before getting comfortable. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. Thankfully its dividend payments took up just 33% of the free cash flow it generated, which is a comfortable payout ratio.

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

historic-dividend
NYSE:ENLC Historic Dividend July 24th 2021

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. EnLink Midstream reported a loss last year, but at least the general trend suggests its income has been improving over the past five years. Even so, an unprofitable company whose business does not quickly recover is usually not a good candidate for dividend investors.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. EnLink Midstream has seen its dividend decline 8.9% per annum on average over the past seven years, which is not great to see.

Remember, you can always get a snapshot of EnLink Midstream's financial health, by checking our visualisation of its financial health, here.

To Sum It Up

Is EnLink Midstream worth buying for its dividend? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." In summary, it's hard to get excited about EnLink Midstream from a dividend perspective.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. Every company has risks, and we've spotted 1 warning sign for EnLink Midstream you should know about.

A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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