Yahoo Finance Boston Pizza Royalties Income Fund (TSE:BPF.UN) Will Pay A Larger Dividend Than Last Year At CA$0.187
The board of Boston Pizza Royalties Income Fund (TSE:BPF.UN) has announced that it will be paying its dividend of CA$0.187 on the 30th of December, an increased payment from last year's comparable dividend. This makes the dividend yield 7.8%, which is above the industry average.
View our latest analysis for Boston Pizza Royalties Income Fund
Boston Pizza Royalties Income Fund's Payment Has Solid Earnings Coverage
Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. However, prior to this announcement, Boston Pizza Royalties Income Fund was quite comfortably covering its dividend with earnings and it was paying more than 75% of its free cash flow to shareholders. The business is earning enough to make the dividend feasible, but the cash payout ratio of 88% shows that most of the cash is going back to the shareholders, which could constrain growth prospects going forward.
Looking forward, earnings per share is forecast to fall by 6.0% over the next year. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 60%, which is comfortable for the company to continue in the future.
Dividend Volatility
The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was CA$1.1 in 2012, and the most recent fiscal year payment was CA$1.20. Dividend payments have grown at less than 1% a year over this period. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.
Boston Pizza Royalties Income Fund May Find It Hard To Grow The Dividend
Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Earnings has been rising at 3.9% per annum over the last five years, which admittedly is a bit slow. If Boston Pizza Royalties Income Fund is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.
We should note that Boston Pizza Royalties Income Fund has issued stock equal to 15% of shares outstanding. Trying to grow the dividend when issuing new shares reminds us of the ancient Greek tale of Sisyphus - perpetually pushing a boulder uphill. Companies that consistently issue new shares are often suboptimal from a dividend perspective.
In Summary
In summary, while it's always good to see the dividend being raised, we don't think Boston Pizza Royalties Income Fund's payments are rock solid. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Boston Pizza Royalties Income Fund has been making. Overall, we don't think this company has the makings of a good income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 5 warning signs for Boston Pizza Royalties Income Fund (1 is potentially serious!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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