It looks like Boston Pizza Royalties Income Fund (TSE:BPF.UN) is about to go ex-dividend in the next 2 days. This means that investors who purchase shares on or after the 18th of February will not receive the dividend, which will be paid on the 26th of February.

Boston Pizza Royalties Income Fund's next dividend payment will be CA$0.065 per share. Last year, in total, the company distributed CA$0.78 to shareholders. Looking at the last 12 months of distributions, Boston Pizza Royalties Income Fund has a trailing yield of approximately 6.8% on its current stock price of CA$11.48. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Boston Pizza Royalties Income Fund

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Last year Boston Pizza Royalties Income Fund paid out 105% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings.

Click here to see how much of its profit Boston Pizza Royalties Income Fund paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Boston Pizza Royalties Income Fund's earnings per share have fallen at approximately 16% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Boston Pizza Royalties Income Fund has seen its dividend decline 5.5% per annum on average over the past 10 years, which is not great to see. While it's not great that earnings and dividends per share have fallen in recent years, we're encouraged by the fact that management has trimmed the dividend rather than risk over-committing the company in a risky attempt to maintain yields to shareholders.

The Bottom Line

Should investors buy Boston Pizza Royalties Income Fund for the upcoming dividend? Earnings per share are in decline and Boston Pizza Royalties Income Fund is paying out what we feel is an uncomfortably high percentage of its profit as dividends. Generally we think dividend investors should avoid businesses in this situation, as high payout ratios and declining earnings can lead to the dividend being cut. This is not an overtly appealing combination of characteristics, and we're just not that interested in this company's dividend.

So if you're still interested in Boston Pizza Royalties Income Fund despite it's poor dividend qualities, you should be well informed on some of the risks facing this stock. Our analysis shows 5 warning signs for Boston Pizza Royalties Income Fund and you should be aware of these before buying any shares.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

This article by Simply Wall St is general in nature. 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.

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