BRP (TSE:DOO) Has Announced That It Will Be Increasing Its Dividend To CA$0.21

BRP Inc. (TSE:DOO) has announced that it will be increasing its dividend from last year's comparable payment on the 22nd of April to CA$0.21. Even though the dividend went up, the yield is still quite low at only 0.9%.

View our latest analysis for BRP

BRP's Earnings Easily Cover The Distributions

If it is predictable over a long period, even low dividend yields can be attractive. However, prior to this announcement, BRP's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 48.0% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 6.1%, which is in the range that makes us comfortable with the sustainability of the dividend.

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BRP's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. Since 2017, the dividend has gone from CA$0.32 total annually to CA$0.84. This means that it has been growing its distributions at 15% per annum over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that BRP has grown earnings per share at 34% per year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

We Really Like BRP's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for BRP that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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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.