Enbridge’s Dividend Safety

The slowdown will certainly impact the demand for oil and gas. That could lead to slower volumes of oil and gas going through Enbridge’s pipelines, which would impact the company’s revenue and cash flow.

Additionally, the crash in commodity prices may force oil and gas producers to renegotiate.

The most accurate measure of cash flow for pipeline companies, especially when it comes to dividend payments, is called cash available for distribution, or CAD.

Enbridge’s CAD has been steadily rising. It rose every year since 2016 from CA$3.71 billion to CA$9.22 billion last year. This year, the company is forecast to generate CA$9.42 billion.

Of course, this year’s forecast may come down, perhaps significantly.

But Enbridge has plenty of room before CAD drops below what the company pays shareholders.

Last year, Enbridge paid shareholders CA$6.36 billion in dividends for a payout ratio of 69%. A company’s payout ratio is the percentage of earnings or cash flow (I use cash flow) that it pays out in dividends.

This year, Enbridge’s payout ratio was expected to stay about the same.

Chart - Enbridge's Expected Payout Ratio


But even if CAD dropped by CA$2.5 billion, the company would still bring in enough cash to afford its dividend.

Enbridge has paid a dividend every year for 65 years. It has raised its dividend every year since 1996. I don’t suspect management is going to want to end that impressive streak.

The current quarterly dividend is CA$0.81 per share or CA$3.24 per year. That comes out to $2.26 in U.S. dollars and equals an impressive 8.8% yield.

This year will have a lot of unknowns. Nothing is for certain anymore, but I expect Enbridge to continue to sustain and raise its dividend – even during a difficult 2020.

Dividend Safety Rating: A

Dividend Grade Guide

1 2
View single page >> |

Disclaimer: Nothing published by Wealthy Retirement should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not ...

How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.


Leave a comment to automatically be entered into our contest to win a free Echo Show.