Enbridge Inc. (TSE:ENB) stock is about to trade ex-dividend in 4 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. This means that investors who purchase Enbridge's shares on or after the 15th of November will not receive the dividend, which will be paid on the 1st of December.

The company's next dividend payment will be CA$0.915 per share, on the back of last year when the company paid a total of CA$3.66 to shareholders. Calculating the last year's worth of payments shows that Enbridge has a trailing yield of 6.2% on the current share price of CA$58.93. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Enbridge can afford its dividend, and if the dividend could grow.

See our latest analysis for Enbridge

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Enbridge paid out 123% of profit in the past year, which we think is typically not sustainable unless there are mitigating characteristics such as unusually strong cash flow or a large cash balance. A useful secondary check can be to evaluate whether Enbridge generated enough free cash flow to afford its dividend. Over the past year it paid out 116% of its free cash flow as dividends, which is uncomfortably high. It's hard to consistently pay out more cash than you generate without either borrowing or using company cash, so we'd wonder how the company justifies this payout level.

Cash is slightly more important than profit from a dividend perspective, but given Enbridge's payouts were not well covered by either earnings or cash flow, we would be concerned about the sustainability of this dividend.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Enbridge's earnings per share have been growing at 15% a year for the past five years. Earnings are growing pretty quickly, which is great, but it's uncomfortably to see the company paying out 123% of earnings. Unless there are extenuating circumstances, we feel this is a clear concern around the sustainability of the dividend.