Grupo Bimbo. de's (BMV:BIMBOA) Upcoming Dividend Will Be Larger Than Last Year's

Grupo Bimbo, S.A.B. de C.V. (BMV:BIMBOA) has announced that it will be increasing its periodic dividend on the 14th of May to MX$1.00, which will be 6.4% higher than last year's comparable payment amount of MX$0.94. Despite this raise, the dividend yield of 1.6% is only a modest boost to shareholder returns.

We've discovered 2 warning signs about Grupo Bimbo. de. View them for free.

Grupo Bimbo. de's Future Dividend Projections Appear Well Covered By Earnings

Even a low dividend yield can be attractive if it is sustained for years on end. However, prior to this announcement, Grupo Bimbo. de's dividend was comfortably covered by both cash flow and earnings. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 27.6% over the next year. If the dividend continues on this path, the payout ratio could be 33% by next year, which we think can be pretty sustainable going forward.

View our latest analysis for Grupo Bimbo. de

Grupo Bimbo. de's Dividend Has Lacked Consistency

Looking back, Grupo Bimbo. de's dividend hasn't been particularly consistent. This suggests that the dividend might not be the most reliable. The annual payment during the last 9 years was MX$0.24 in 2016, and the most recent fiscal year payment was MX$0.94. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. Grupo Bimbo. de has grown distributions at a rapid rate despite cutting the dividend at least once in the past. Companies that cut once often cut again, so we would be cautious about buying this stock solely for the dividend income.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Grupo Bimbo. de has impressed us by growing EPS at 19% per year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Grupo Bimbo. de's prospects of growing its dividend payments in the future.

We Really Like Grupo Bimbo. de's Dividend

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Grupo Bimbo. de that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield 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.