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For investors who seek to build wealth through dividend payments, it’s important to stay informed about key dates. Enbridge Inc. (TSE:ENB) is approaching its ex-dividend date in just four days. The ex-dividend date is crucial because it determines eligibility for dividend payments. Specifically, any purchases made on or after this date, which falls on February 14th, will not qualify for the upcoming dividend payment scheduled for March 1st.
The company is set to pay CA$0.9425 per share, contributing to a total of CA$3.66 per share over the past year. This results in a current trailing yield of approximately 5.9%, based on the share price of CA$63.51. While dividends can significantly enhance returns for long-term shareholders, their sustainability hinges on the company’s ability to generate sufficient earnings.
Explore our latest analysis for Enbridge.
Typically, dividends are distributed from profits; therefore, a company paying dividends that exceed its profits poses a risk for future cuts. Last year, Enbridge paid out an alarming 123% of its profits as dividends. This raises concerns about the viability of maintaining such payouts. Additionally, Enbridge’s free cash flow was also insufficient, as it paid out 116% of its generated cash flow, which could lead to financial instability in meeting dividend commitments.
The debate around dividend sustainability often emphasizes cash flow over reported profits. Given that Enbridge’s dividends are uncomfortably high in relation to both earnings and cash flow, apprehensions surrounding the reliability of these payments are warranted.
Click here for the company’s payout ratio and future dividend estimates.
Companies with strong growth trajectories are typically better positioned to pay dividends, as rising earnings per share (EPS) allow for easier dividend increases. Over the past five years, Enbridge’s EPS has actually grown at a commendable rate of 15% annually. However, the disproportionate dividend payout remains a considerable concern.
When evaluating Enbridge’s dividend history, it’s notable that the company has averaged a 10% increase in dividends over the last decade. This trend of growth can be promising, especially in conjunction with EPS growth.
So, should dividend-focused investors consider purchasing shares of Enbridge? While rising EPS is a positive indicator, the elevated payout ratio raises significant questions about the company’s ability to maintain dividend payments, especially during economic downturns. Due to these concerns, it may be wise to approach this investment with caution.
For investors keen on understanding potential risks linked to Enbridge, there are 2 warning signs that warrant attention.
If you’re looking for reliable dividend stocks, consider checking our curated selection of top dividend stocks.
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This article is intended for informational purposes only. The commentary draws on historical data and analyst forecasts but does not serve as financial advice. It should not be construed as a recommendation to buy or sell any stock, and it doesn’t consider individual financial situations or objectives. We strive to provide long-term analytical perspectives rooted in fundamental data, although we cannot incorporate the most recent price-sensitive company updates within this context. Simply Wall St does not hold positions in any of the stocks mentioned.
Source
finance.yahoo.com