Be Sure To Check Out Gruma, S.A.B. de C.V. (BMV:GRUMAB) Before It Goes Ex-Dividend

It looks like Gruma, S.A.B. de C.V. (BMV:GRUMAB) is about to go ex-dividend in the next 3 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase Gruma. de's shares on or after the 7th of July will not receive the dividend, which will be paid on the 9th of July.

The company's next dividend payment will be Mex$1.30 per share. Last year, in total, the company distributed Mex$5.20 to shareholders. Calculating the last year's worth of payments shows that Gruma. de has a trailing yield of 2.3% on the current share price of MX$224.95. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. As a result, readers should always check whether Gruma. de has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Gruma. de

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. That's why it's good to see Gruma. de paying out a modest 34% of its earnings. A useful secondary check can be to evaluate whether Gruma. de generated enough free cash flow to afford its dividend. Thankfully its dividend payments took up just 26% of the free cash flow it generated, which is a comfortable payout ratio.

It's positive to see that Gruma. de's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Gruma. de, with earnings per share up 5.5% on average over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Gruma. de has delivered an average of 19% per year annual increase in its dividend, based on the past seven years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

Final Takeaway

From a dividend perspective, should investors buy or avoid Gruma. de? Earnings per share have been growing moderately, and Gruma. de is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Gruma. de is being conservative with its dividend payouts and could still perform reasonably over the long run. There's a lot to like about Gruma. de, and we would prioritise taking a closer look at it.

In light of that, while Gruma. de has an appealing dividend, it's worth knowing the risks involved with this stock. Case in point: We've spotted 2 warning signs for Gruma. de you should be aware of.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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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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