Should Grupo Profuturo, S.A.B. de C.V. (BMV:GPROFUT) Be Part Of Your Dividend Portfolio?

Today we'll take a closer look at Grupo Profuturo, S.A.B. de C.V. (BMV:GPROFUT) from a dividend investor's perspective. Owning a strong business and reinvesting the dividends is widely seen as an attractive way of growing your wealth. If you are hoping to live on your dividends, it's important to be more stringent with your investments than the average punter. Regular readers know we like to apply the same approach to each dividend stock, and we hope you'll find our analysis useful.

A high yield and a long history of paying dividends is an appealing combination for Grupo Profuturo. de. We'd guess that plenty of investors have purchased it for the income. When buying stocks for their dividends, you should always run through the checks below, to see if the dividend looks sustainable.

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Payout ratios

Companies (usually) pay dividends out of their earnings. If a company is paying more than it earns, the dividend might have to be cut. Comparing dividend payments to a company's net profit after tax is a simple way of reality-checking whether a dividend is sustainable. Grupo Profuturo. de paid out 55% of its profit as dividends, over the trailing twelve month period. This is a healthy payout ratio, and while it does limit the amount of earnings that can be reinvested in the business, there is also some room to lift the payout ratio over time.

Consider getting our latest analysis on Grupo Profuturo. de's financial position here.

Dividend Volatility

Before buying a stock for its income, we want to see if the dividends have been stable in the past, and if the company has a track record of maintaining its dividend. For the purpose of this article, we only scrutinise the last decade of Grupo Profuturo. de's dividend payments. Its dividend payments have declined on at least one occasion over the past 10 years. During the past 10-year period, the first annual payment was Mex$0.8 in 2011, compared to Mex$4.6 last year. This works out to be a compound annual growth rate (CAGR) of approximately 19% a year over that time. The dividends haven't grown at precisely 19% every year, but this is a useful way to average out the historical rate of growth.

So, its dividends have grown at a rapid rate over this time, but payments have been cut in the past. The stock may still be worth considering as part of a diversified dividend portfolio.

Conclusion

To summarise, shareholders should always check that Grupo Profuturo. de's dividends are affordable, that its dividend payments are relatively stable, and that it has decent prospects for growing its earnings and dividend. Grupo Profuturo. de's payout ratio is within an average range for most market participants. Unfortunately, the company has not been able to generate earnings growth, and cut its dividend at least once in the past. In summary, we're unenthused by Grupo Profuturo. de as a dividend stock. It's not that we think it is a bad company; it simply falls short of our criteria in some key areas.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for Grupo Profuturo. de that investors should know about before committing capital to this stock.

Looking for more high-yielding dividend ideas? Try our curated list of dividend stocks with a yield above 3%.

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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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