Boston Pizza Royalties Income Fund (TSE:BPF.UN) Has Affirmed Its Dividend Of CA$0.107

The board of Boston Pizza Royalties Income Fund (TSE:BPF.UN) has announced that it will pay a dividend of CA$0.107 per share on the 31st of October. This makes the dividend yield 8.5%, which will augment investor returns quite nicely.

Check out our latest analysis for Boston Pizza Royalties Income Fund

Boston Pizza Royalties Income Fund's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Boston Pizza Royalties Income Fund's was paying out quite a large proportion of earnings and 84% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but we don't think that there are necessarily signs that the dividend might be unsustainable.

Looking forward, earnings per share is forecast to fall by 0.5% over the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 78% in the next 12 months, which is on the higher end of the range we would say is sustainable.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2013, the annual payment back then was CA$1.18, compared to the most recent full-year payment of CA$1.28. Dividend payments have been growing, but very slowly over the period. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Boston Pizza Royalties Income Fund has seen EPS rising for the last five years, at 11% per annum. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

Our Thoughts On Boston Pizza Royalties Income Fund's Dividend

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Boston Pizza Royalties Income Fund's payments, as there could be some issues with sustaining them into the future. While Boston Pizza Royalties Income Fund is earning enough to cover the dividend, we are generally unimpressed with its future prospects. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Just as an example, we've come across 3 warning signs for Boston Pizza Royalties Income Fund you should be aware of, and 1 of them is significant. Is Boston Pizza Royalties Income Fund not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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