EnLink Midstream's (NYSE:ENLC) Shareholders Will Receive A Bigger Dividend Than Last Year
EnLink Midstream, LLC (NYSE:ENLC) has announced that it will be increasing its dividend from last year's comparable payment on the 12th of May to $0.125. Based on this payment, the dividend yield for the company will be 4.9%, which is fairly typical for the industry.
Check out our latest analysis for EnLink Midstream
EnLink Midstream's Dividend Is Well Covered By Earnings
Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, EnLink Midstream's dividend was comfortably covered by both cash flow and earnings. This indicates that quite a large proportion of earnings is being invested back into the business.
Looking forward, earnings per share is forecast to rise by 4.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 49% by next year, which is in a pretty sustainable range.
EnLink Midstream's Dividend Has Lacked Consistency
Looking back, EnLink Midstream's dividend hasn't been particularly consistent. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 9 years was $0.72 in 2014, and the most recent fiscal year payment was $0.50. The dividend has shrunk at around 4.0% a year during that period. Declining dividends isn't generally what we look for as they can indicate that the company is running into some challenges.
Dividend Growth Is Doubtful
With a relatively unstable dividend, it's even more important to see if earnings per share is growing. In the last five years, EnLink Midstream's earnings per share has shrunk at approximately 8.0% per annum. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.
In Summary
Overall, we always like to see the dividend being raised, but we don't think EnLink Midstream will make a great income stock. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. This company is not in the top tier of income providing stocks.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 4 warning signs for EnLink Midstream (2 make us uncomfortable!) that you should be aware of before investing. Is EnLink Midstream not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
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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.
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