Grupo Bimbo. de (BMV:BIMBOA) Is Increasing Its Dividend To MX$0.94

The board of Grupo Bimbo, S.A.B. de C.V. (BMV:BIMBOA) has announced that it will be paying its dividend of MX$0.94 on the 14th of May, an increased payment from last year's comparable dividend. This takes the annual payment to 2.2% of the current stock price, which is about average for the industry.

See our latest analysis for Grupo Bimbo. de

Grupo Bimbo. de's Earnings Easily Cover The Distributions

Solid dividend yields are great, but they only really help us if the payment is sustainable. Prior to this announcement, Grupo Bimbo. de's earnings easily covered the dividend, but free cash flows were negative. With the company not bringing in any cash, paying out to shareholders is bound to become difficult at some point.

The next year is set to see EPS grow by 5.6%. Assuming the dividend continues along recent trends, we think the payout ratio could be 33% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company has a long dividend track record, but it doesn't look great with cuts in the past. Since 2014, the dividend has gone from MX$0.70 total annually to MX$1.56. This works out to be a compound annual growth rate (CAGR) of approximately 8.3% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Grupo Bimbo. de might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Grupo Bimbo. de has impressed us by growing EPS at 20% per year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

Our Thoughts On Grupo Bimbo. de's Dividend

Overall, we always like to see the dividend being raised, but we don't think Grupo Bimbo. de will make a great income stock. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We don't think Grupo Bimbo. 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 3 warning signs for Grupo Bimbo. de that investors should know about before committing capital to this stock. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.