Gruma. de (BMV:GRUMAB) Has Announced That It Will Be Increasing Its Dividend To Mex$1.35

May 26, 2022
  •  Updated
June 09, 2022
BMV:GRUMA B
Source: Shutterstock

Gruma, S.A.B. de C.V. (BMV:GRUMAB) will increase its dividend on the 8th of July to Mex$1.35. This makes the dividend yield about the same as the industry average at 2.2%.

See our latest analysis for Gruma. de

Gruma. de Is Paying Out More Than It Is Earning

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Gruma. de was easily earning enough to cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

The next 12 months is set to see EPS grow by 6.3%. If the dividend continues on its recent course, the company could be paying out several times what it earns in the next 12 months, which could start applying pressure to the balance sheet.

historic-dividend
BMV:GRUMA B Historic Dividend May 26th 2022

Gruma. de Doesn't Have A Long Payment History

Gruma. de's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2014, the dividend has gone from US$0.12 to US$0.26. This means that it has been growing its distributions at 11% per annum over that time. Gruma. de has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Gruma. de May Find It Hard To Grow The Dividend

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Earnings have grown at around 2.4% a year for the past five years, which isn't massive but still better than seeing them shrink. While growth may be thin on the ground, Gruma. de could always pay out a higher proportion of earnings to increase shareholder returns.

Our Thoughts On Gruma. de's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

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. Taking the debate a bit further, we've identified 2 warning signs for Gruma. de that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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