Grupo Lamosa. de (BMV:LAMOSA) Is Increasing Its Dividend To MX$2.00

Grupo Lamosa, S.A.B. de C.V. (BMV:LAMOSA) has announced that it will be increasing its periodic dividend on the 9th of April to MX$2.00, which will be 11% higher than last year's comparable payment amount of MX$1.80. This makes the dividend yield about the same as the industry average at 1.6%.

View our latest analysis for Grupo Lamosa. de

Estimates Indicate Grupo Lamosa. de's Could Struggle to Maintain Dividend Payments In The Future

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, the company was paying out 107% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 19%. Given that the dividend is a cash outflow, we think that cash is more important than accounting measures of profit when assessing the dividend, so this is a mitigating factor.

EPS is set to fall by 36.6% over the next 12 months if recent trends continue. Assuming the dividend continues along recent trends, we believe the payout ratio could reach 959%, which could put the dividend under pressure if earnings don't start to improve.

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Grupo Lamosa. de Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of MX$0.27 in 2015 to the most recent total annual payment of MX$1.80. This means that it has been growing its distributions at 21% per annum over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Has Limited Growth Potential

Investors could be attracted to the stock based on the quality of its payment history. Let's not jump to conclusions as things might not be as good as they appear on the surface. Grupo Lamosa. de's earnings per share has shrunk at 37% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

Our Thoughts On Grupo Lamosa. de's Dividend

Overall, we always like to see the dividend being raised, but we don't think Grupo Lamosa. de will make a great income stock. The company has been bring in plenty of cash to cover the dividend, but we don't necessarily think that makes it a great dividend stock. We would be a touch cautious of relying on this stock primarily for the dividend income.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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 Grupo Lamosa. de you should be aware of, and 1 of them is a bit concerning. Is Grupo Lamosa. de not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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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.