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

Gruma, S.A.B. de C.V. (BMV:GRUMAB) will increase its dividend from last year's comparable payment on the 7th of October to $1.35. This takes the annual payment to 2.1% of the current stock price, which is about average for the industry.

Check out our latest analysis for Gruma. de

Gruma. de Doesn't Earn Enough To Cover Its Payments

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, Gruma. de's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

The next 12 months is set to see EPS grow by 28.1%. 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.

Gruma. de Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 8 years of history we want to see a few more years of history before making any solid conclusions. Since 2014, the annual payment back then was $0.116, compared to the most recent full-year payment of $0.258. This implies that the company grew its distributions at a yearly rate of about 11% over that duration. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend's Growth Prospects Are Limited

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Earnings has been rising at 2.4% per annum over the last five years, which admittedly is a bit slow. If Gruma. de is struggling to find viable investments, it always has the option to increase its payout ratio to pay more to shareholders.

Our Thoughts On Gruma. de's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. 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.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for Gruma. de that you should be aware of before investing. Is Gruma. 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.