Assessing the Sustainability of Enbridge Inc's Upcoming Dividend
Enbridge Inc(ENB, Financial) recently announced a dividend of $0.92 per share, payable on 2024-03-01, with the ex-dividend date set for 2024-02-14. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Enbridge Inc's dividend performance and assess its sustainability.
What Does Enbridge Inc Do?
Enbridge owns extensive midstream assets that transport hydrocarbons across the U.S. and Canada. Its pipeline network consists of the Canadian Mainline system, regional oil sands pipelines, and natural gas pipelines. The company also owns and operates a regulated natural gas utility and Canada's largest natural gas distribution company. The firm has a small renewables portfolio primarily focused on onshore and offshore wind projects.
A Glimpse at Enbridge Inc's Dividend History
Enbridge Inc has maintained a consistent dividend payment record since 1985. Dividends are currently distributed on a quarterly basis. Enbridge Inc has increased its dividend each year since 2003. The stock is thus listed as a dividend achiever, an honor that is given to companies that have increased their dividend each year for at least the past 21 years. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Enbridge Inc's Dividend Yield and Growth
As of today, Enbridge Inc currently has a 12-month trailing dividend yield of 7.52% and a 12-month forward dividend yield of 7.73%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, Enbridge Inc's annual dividend growth rate was 3.10%. Extended to a five-year horizon, this rate increased to 5.50% per year. And over the past decade, Enbridge Inc's annual dividends per share growth rate stands at an impressive 11.10%.
Based on Enbridge Inc's dividend yield and five-year growth rate, the 5-year yield on cost of Enbridge Inc stock as of today is approximately 10.80%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-12-31, Enbridge Inc's dividend payout ratio is 1.19. And this may suggest that the company's dividend may not be sustainable.
Enbridge Inc's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Enbridge Inc's profitability 7 out of 10 as of 2023-12-31, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Enbridge Inc's growth rank of 7 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and Enbridge Inc's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Enbridge Inc's revenue has increased by approximately 3.10% per year on average, a rate that underperforms than approximately 66.12% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Enbridge Inc's earnings increased by approximately 7.30% per year on average, a rate that underperforms than approximately 65.19% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of -2.20%, which underperforms than approximately 77.64% of global competitors.
Next Steps
In conclusion, Enbridge Inc's consistent dividend growth record and high yield on cost present an attractive proposition for income-focused investors. However, the high dividend payout ratio raises questions about the sustainability of such payments in the long term. While the company's profitability rank is strong, the mixed performance in revenue and earnings growth metrics suggests that Enbridge Inc may need to navigate carefully to maintain its dividend achiever status. Investors should consider both the opportunities presented by Enbridge Inc's dividend payments and the potential risks associated with its payout ratio and growth metrics. GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
