A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Over the past 10 years, Enbridge Inc (NYSE:ENB) has returned an average of 4.00% per year to shareholders in terms of dividend yield. Does Enbridge tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. Check out our latest analysis for Enbridge
5 questions I ask before picking a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
- Does it pay an annual yield higher than 75% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has the amount of dividend per share grown over the past?
- Does earnings amply cover its dividend payments?
- Will it be able to continue to payout at the current rate in the future?
Does Enbridge pass our checks?
Enbridge has a trailing twelve-month payout ratio of 176.87%, meaning the dividend is not sufficiently covered by its earnings. Going forward, analysts expect ENB’s payout to reduce to 102.37% of its earnings, which leads to a dividend yield of 7.41%. However, EPS should increase to CA$2.13, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. 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. ENB has increased its DPS from CA$0.66 to CA$2.68 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes ENB a true dividend rockstar. Relative to peers, Enbridge produces a yield of 6.62%, which is high for Oil and Gas stocks.
Taking into account the dividend metrics, Enbridge ticks most of the boxes as a strong dividend investment, putting it in my list of top dividend payers. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three pertinent factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for ENB’s future growth? Take a look at our free research report of analyst consensus for ENB’s outlook.
- Valuation: What is ENB 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 ENB is currently mispriced by the market.
- Other 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 pass 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.