The board of Gruma, S.A.B. de C.V. (BMV:GRUMAB) has announced that it will be increasing its dividend on the 8th of July to Mex$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 Is Paying Out More Than It Is Earning
We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, Gruma. de's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.
Over the next year, EPS is forecast to expand by 3.8%. However, if the dividend continues growing along recent trends, it could start putting pressure on the balance sheet with the payout ratio getting very high over the next year.
Gruma. de Doesn't Have A Long Payment History
It is great to see that Gruma. de has been paying a stable dividend for a number of years now, however we want to be a bit cautious about whether this will remain true through a full economic cycle. Since 2014, the first annual payment was US$0.12, compared to the most recent full-year payment of US$0.26. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. 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
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. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.
Our Thoughts On Gruma. de's Dividend
Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen 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. 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.
About BMV:GRUMA B
Gruma. de
Produces and sells corn flour, tortillas, and other related products.
Outstanding track record and undervalued.
