Corporativo Fragua. de (BMV:FRAGUAB) Is Increasing Its Dividend To MX$14.30

Corporativo Fragua, S.A.B. de C.V. (BMV:FRAGUAB) will increase its dividend on the 28th of April to MX$14.30, which is 10% higher than last year's payment from the same period of MX$13.00. The payment will take the dividend yield to 2.5%, which is in line with the average for the industry.

We've discovered 2 warning signs about Corporativo Fragua. de. View them for free.

Corporativo Fragua. de's Projected Earnings Seem Likely To Cover Future Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Corporativo Fragua. de's dividend was only 27% of earnings, however it was paying out 123% of free cash flows. A cash payout ratio this high could put the dividend under pressure and force the company to reduce it in the future if it were to run into tough times.

Looking forward, earnings per share could rise by 25.1% over the next year if the trend from the last few years continues. If the dividend continues along recent trends, we estimate the payout ratio will be 28%, which is in the range that makes us comfortable with the sustainability of the dividend.

View our latest analysis for Corporativo Fragua. de

Corporativo Fragua. 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$1.20 in 2015 to the most recent total annual payment of MX$13.00. This means that it has been growing its distributions at 27% 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 Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. Corporativo Fragua. de has impressed us by growing EPS at 25% per year over the past five years. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Corporativo Fragua. de will make a great income stock. While Corporativo Fragua. de is earning enough to cover the payments, the cash flows are lacking. We don't think Corporativo Fragua. de is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For example, we've identified 2 warning signs for Corporativo Fragua. de (1 shouldn't be ignored!) that you should be aware of before investing. Is Corporativo Fragua. 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.