Becle. de's (BMV:CUERVO) Upcoming Dividend Will Be Larger Than Last Year's

Becle, S.A.B. de C.V. (BMV:CUERVO) has announced that it will be increasing its periodic dividend on the 3rd of August to MX$0.4913, which will be 17% higher than last year's comparable payment amount of MX$0.421. Despite this raise, the dividend yield of 1.0% is only a modest boost to shareholder returns.

Check out our latest analysis for Becle. de

Becle. de's Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Prior to this announcement, Becle. de's earnings easily covered the dividend, but free cash flows were negative. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

Over the next year, EPS is forecast to expand by 5.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 29%, which is in the range that makes us comfortable with the sustainability of the dividend.

Becle. de's Dividend Has Lacked Consistency

Even in its relatively short history, the company has reduced the dividend at least once. This suggests that the dividend might not be the most reliable. Since 2018, the dividend has gone from MX$0.508 total annually to MX$0.421. This works out to be a decline of approximately 3.7% per year over that time. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.

Dividend Growth May Be Hard To Achieve

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Unfortunately, Becle. de's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. While growth may be thin on the ground, Becle. de could always pay out a higher proportion of earnings to increase shareholder returns.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While Becle. de is earning enough to cover the payments, the cash flows are lacking. We don't think Becle. de is a great stock to add to your portfolio if income is your focus.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. Companies that are growing earnings tend to be the best dividend stocks over the long term. See what the 7 analysts we track are forecasting for Becle. de for free with public analyst estimates for the company. Is Becle. de not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.