Enbridge stock is currently trading at an attractive dividend yield of 5.9%. That’s around 410 basis points higher than the US ten-year Treasury yield. Enbridge’s yield is also higher compared to most S&P 500 stocks, as well as many of its midstream peers. So is Enbridge (ENB) an attractive dividend stock? Let’s check that out next.
Enbridge stock’s dividend history
Canadian energy company Enbridge has paid dividends to its shareholders for more than 64 years now. Over 20 years, Enbridge’s dividends grew at a CAGR (compound annual growth rate) of 12.1%. Enbridge raised its dividend per share by 10% in December 2018. So the company has a solid track record of dividend growth.
Dividend growth outlook
While the company has delivered consistent dividend growth over the years, it’s also important to look at the company’s dividend growth prospects. Enbridge expects a 10% annual dividend growth through 2020. The company’s robust capital program and its upcoming projects should fuel its cash flow growth and, in turn, dividend growth.
Healthy payout ratio
For 2019, Enbridge paid around 65% of its cash flows as dividends. The company targets a payout ratio of below 65% of its distributable cash flows in the long term. This payout ratio allows it to retain capital for investment into growth projects.
Last December, Enbridge suspended its dividend reinvestment program. The company has moved to a fully self-funded financing program. It doesn’t require external equity to fund its growth projects. This step provides the company with financial flexibility in two ways. First, stock issuance is dilutive to current shareholders and puts pressure on the stock price. Second, when a stock’s price is depressed, issuing equity is an unattractive funding option.
In response to depressed stock prices, midstream companies are increasingly avoiding external equity to fund growth projects. Enterprise Products Partners (EPD) is another company that has moved toward a self-funding model of growth. Learn more in Enterprise Products Moves toward Self-Funding Capital Projects.
To conclude, Enbridge’s strong dividend history, attractive growth prospects, and healthy payout ratio makes it an attractive dividend stock. To learn more about what Enbridge does, read Must-Know: Enbridge’s Five Business Segments.
If you want to find out more about attractive dividend stocks, read 5 Dividend Stocks for an Uncertain Market. For the latest energy sector updates, refer to Market Realist’s Energy and Utilities page.