Gruma. de (BMV:GRUMAB) Is Increasing Its Dividend To $1.44

The board of Gruma, S.A.B. de C.V. (BMV:GRUMAB) has announced that it will be paying its dividend of $1.44 on the 11th of July, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 1.7%, which is fairly typical for the industry.

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Gruma. de's Projections Indicate Future Payments May Be Unsustainable

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important. 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 10.4%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio getting very high over the next year.

View our latest analysis for Gruma. de

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of $0.116 in 2015 to the most recent total annual payment of $0.293. This means that it has been growing its distributions at 9.7% per annum over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. Gruma. de has seen EPS rising for the last five years, at 28% per annum. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.

We Really Like Gruma. 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. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. For example, we've picked out 1 warning sign for Gruma. de that investors should know about before committing capital to this stock. 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.