Oil and gas stocks have been cutting or suspending their dividends left and right over the past few weeks. One stock that’s been quiet about its dividend has been Enbridge Inc (TSX:ENB)(NYSE:ENB). The oil and gas giant has its annual shareholders meeting on May 5 and it will discuss its first-quarter results of 2020 on May 7. If it’s going to announce a dividend suspension or cut, it’s likely going to happen this coming week.
And given the direction of the industry, it’s hard to envision a scenario where Enbridge doesn’t make an adjustment to its payouts. Industry giants like Shell (NYSE: SJR.B) and Exxon Mobil (NYSE:XOM) have both had to adjust their payouts and Enbridge is not in any better of a situation. With Enbridge being based in Canada, where there’s a lot of animosity towards the industry, it may be in an even worse position moving forward.
Although Enbridge has generated positive free cash flow for eight straight quarters, it hasn’t always been enough to cover its dividend payments. In its most recent quarter, the company paid out $1.6 billion in dividends despite generating just $365 million in free cash flow.
Trends like that can’t continue, and the likelihood is they’ll only get worse as the industry continues to suffer.
It would be a shock if Enbridge didn’t announce some sort of change to its dividend. However, given the shape that the economy and the oil and gas industry are in today, cutting or suspending payouts is a move that Enbridge will have to consider sooner or later. And investors should expect it, too.
