Boston Pizza Royalties Income Fund (TSE:BPF.UN) Is Paying Out A Larger Dividend Than Last Year

Boston Pizza Royalties Income Fund (TSE:BPF.UN) has announced that it will be increasing its dividend from last year's comparable payment on the 31st of August to CA$0.10. This will take the dividend yield to an attractive 7.6%, providing a nice boost to shareholder returns.

View our latest analysis for Boston Pizza Royalties Income Fund

Boston Pizza Royalties Income Fund's Earnings Easily Cover The Distributions

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Boston Pizza Royalties Income Fund was earning enough to cover the previous dividend, but it was paying out quite a large proportion of its free cash flows. By paying out so much of its cash flows, this could indicate that the company has limited opportunities for investment and growth.

EPS is set to fall by 6.5% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 65%, which is comfortable for the company to continue in the future.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of CA$1.1 in 2012 to the most recent total annual payment of CA$1.20. Dividend payments have been growing, but very slowly over the period. We're glad to see the dividend has risen, but with a limited rate of growth and fluctuations in the payments the total shareholder return may be limited.

Dividend Growth May Be Hard To Achieve

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Boston Pizza Royalties Income Fund hasn't seen much change in its earnings per share over the last five years.

We should note that Boston Pizza Royalties Income Fund has issued stock equal to 15% of shares outstanding. Regularly doing this can be detrimental - it's hard to grow dividends per share when new shares are regularly being created.

Our Thoughts On Boston Pizza Royalties Income Fund's Dividend

Overall, we always like to see the dividend being raised, but we don't think Boston Pizza Royalties Income Fund will make a great income stock. The low payout ratio is a redeeming feature, but generally we are not too happy with the payments Boston Pizza Royalties Income Fund has been making. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 5 warning signs for Boston Pizza Royalties Income Fund you should be aware of, and 1 of them is potentially serious. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.