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

BRP Inc. (TSE:DOO) will pay a dividend of CA$0.21 on the 12th of July. Despite this raise, the dividend yield of 1.0% is only a modest boost to shareholder returns.

See our latest analysis for BRP

BRP's Earnings Easily Cover The Distributions

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, BRP's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 36.0%. 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.

BRP's Dividend Has Lacked Consistency

BRP has been paying dividends for a while, but the track record isn't stellar. This makes us cautious about the consistency of the dividend over a full economic cycle. Since 2017, the dividend has gone from CA$0.32 total annually to CA$0.84. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. BRP has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

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. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

We Really Like BRP's Dividend

Overall, a dividend increase is always good, and we think that BRP is a strong income stock thanks to its track record and growing earnings. 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.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for BRP that investors should take into consideration. 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.