Boston Pizza Royalties Income Fund (TSE:BPF.UN) is about to trade ex-dividend in the next 3 days. Investors can purchase shares before the 18th of March in order to be eligible for this dividend, which will be paid on the 31st of March.

Boston Pizza Royalties Income Fund's next dividend payment will be CA$0.065 per share, and in the last 12 months, the company paid a total of CA$0.78 per share. Looking at the last 12 months of distributions, Boston Pizza Royalties Income Fund has a trailing yield of approximately 5.9% on its current stock price of CA$13.15. 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 investigate whether Boston Pizza Royalties Income Fund can afford its dividend, and if the dividend could grow.

See 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 105% of its earnings, which is more than we're comfortable with, unless there are mitigating circumstances. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 49% of its free cash flow in the past year.

It's good to see that while Boston Pizza Royalties Income Fund's dividends were not covered by profits, at least they are affordable from a cash perspective. Still, if the company repeatedly paid a dividend greater than its profits, we'd be concerned. Very few companies are able to sustainably pay dividends larger than their reported 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 earnings fall far enough, the company could be forced to cut its dividend. Readers will understand then, why we're concerned to see Boston Pizza Royalties Income Fund's earnings per share have dropped 15% a year over the past five years. Ultimately, when earnings per share decline, the size of the pie from which dividends can be paid, shrinks.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. 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. It's never nice to see earnings and dividends falling, but at least management has cut the dividend rather than potentially risk the company's health in an attempt to maintain it.