BRP (TSE:DOO) Is Due To Pay A Dividend Of CA$0.21

BRP Inc.'s (TSE:DOO) investors are due to receive a payment of CA$0.21 per share on 12th of July. This takes the annual payment to 1.0% of the current stock price, which unfortunately is below what the industry is paying.

See our latest analysis for BRP

BRP's Payment Has Solid Earnings Coverage

While yield is important, another factor to consider about a company's dividend is whether the current payout levels are feasible. However, BRP's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 35.4% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 8.7%, 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

BRP has been paying dividends for a while, but the track record isn't stellar. If the company cuts once, it definitely isn't argument against the possibility of it cutting in the future. The annual payment during the last 7 years was CA$0.32 in 2017, and the most recent fiscal year payment was CA$0.84. This works out to be a compound annual growth rate (CAGR) of approximately 15% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. It's encouraging to see that BRP has been growing its earnings per share at 26% a 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.

BRP Looks Like A Great Dividend Stock

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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 2 warning signs for BRP that investors should know about before committing capital to this stock. Is BRP not quite the opportunity you were looking for? Why not check out our selection of top 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.