BRP (TSE:DOO) Is Increasing Its Dividend To CA$0.21

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

Check out our latest analysis for BRP

BRP's Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. Before making this announcement, BRP was easily earning enough to 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 21.7% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 7.4% by next year, which is in a pretty sustainable range.

BRP's Dividend Has Lacked Consistency

It's comforting to see that BRP has been paying a dividend for a number of years now, however it has been cut at least once in that time. This suggests that the dividend might not be the most reliable. Since 2017, the annual payment back then was CA$0.32, compared to the most recent full-year payment of CA$0.84. This implies that the company grew its distributions at a yearly rate of about 15% over that duration. 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 see if earnings per share is growing. We are encouraged to see that BRP has grown earnings per share at 34% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

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. Earnings are easily covering distributions, and the company is generating plenty of cash. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 1 warning sign 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.