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It looks like Boston Pizza Royalties Income Fund (TSE:BPF.UN) is about to go ex-dividend in the next 4 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase Boston Pizza Royalties Income Fund's shares before the 18th of August to receive the dividend, which will be paid on the 31st of August.
The company's next dividend payment will be CA$0.11 per share. Last year, in total, the company distributed CA$1.28 to shareholders. Based on the last year's worth of payments, Boston Pizza Royalties Income Fund has a trailing yield of 7.7% on the current stock price of CA$16.74. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for Boston Pizza Royalties Income Fund
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Boston Pizza Royalties Income Fund paid out 72% of its earnings to investors last year, a normal payout level for most businesses. A useful secondary check can be to evaluate whether Boston Pizza Royalties Income Fund generated enough free cash flow to afford its dividend. Over the last year it paid out 74% of its free cash flow as dividends, within the usual range for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Boston Pizza Royalties Income Fund earnings per share are up 4.9% per annum over the last five years. Earnings growth has been slim and the company is paying out more than half of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.