Hey there. Earnings and free cash flow payout ratios are not the best ways to analyze a pipeline stock. Inside of their quarterly report, you'll often see them reporting their dividend payout ratio on a distributable cash flow basis. The maintenance capital expenditures and other complex items kind of make FCF and EPS payout ratios look suspect. So instead, they create a distributable cash flow metric that is easier to understand.
Keep in mind these cash flow ratios are created by the pipeline themselves and can vary from company to company. So, TC Energy could calculate DCF (distributable cash flow) differently than Enbridge, who could report differently than Keyera.
What is important to understand is how reliable these numbers have been historically and if they have been, we can put some weight on them as a payout ratio moving forward.
As of right now, Enbridge is reporting distributable cash flows of $5.48 in 2023 and the company pays a dividend of $3.66 a year. This works out to be a payout ratio in terms of DCF of 66.7%, right in line with that the company aims to pay out in its targets.
