Interested In EnLink Midstream's (NYSE:ENLC) Upcoming US$0.13 Dividend? You Have Three Days Left
It looks like EnLink Midstream, LLC (NYSE:ENLC) is about to go ex-dividend in the next 3 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the 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. In other words, investors can purchase EnLink Midstream's shares before the 26th of January in order to be eligible for the dividend, which will be paid on the 9th of February.
The company's next dividend payment will be US$0.13 per share, on the back of last year when the company paid a total of US$0.50 to shareholders. Looking at the last 12 months of distributions, EnLink Midstream has a trailing yield of approximately 4.3% on its current stock price of $11.55. If you buy this business for its dividend, you should have an idea of whether EnLink Midstream's dividend is reliable and sustainable. So we need to investigate whether EnLink Midstream can afford its dividend, and if the dividend could grow.
Check out our latest analysis for EnLink Midstream
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Its dividend payout ratio is 77% of profit, which means the company is paying out a majority of its earnings. The relatively limited profit reinvestment could slow the rate of future earnings growth. We'd be worried about the risk of a drop in earnings. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. It distributed 36% of its free cash flow as dividends, a comfortable payout level for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we're concerned to see EnLink Midstream's earnings per share have dropped 11% a year over the past five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. EnLink Midstream's dividend payments per share have declined at 3.6% per year on average over the past 10 years, which is uninspiring. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.
The Bottom Line
Should investors buy EnLink Midstream for the upcoming dividend? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. To summarise, EnLink Midstream looks okay on this analysis, although it doesn't appear a stand-out opportunity.
If you want to look further into EnLink Midstream, it's worth knowing the risks this business faces. Every company has risks, and we've spotted 2 warning signs for EnLink Midstream (of which 1 is significant!) you should know about.
If you're in the market for strong dividend payers, we recommend checking 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.
