Gruma, S.A.B. de C.V.'s (BMV:GRUMAB) investors are due to receive a payment of $1.35 per share on 12th of January. Based on this payment, the dividend yield will be 1.9%, which is fairly typical for the industry.
See 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. Prior to this announcement, Gruma. de's dividend was only 28% of earnings, however it was paying out 371% of free cash flows. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.
Earnings per share is forecast to rise by 26.0% over the next year. 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 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. The dividend has gone from an annual total of $0.116 in 2014 to the most recent total annual payment of $0.3. This means that it has been growing its distributions at 11% per annum 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.
We Could See Gruma. de's Dividend Growing
Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Gruma. de has seen EPS rising for the last five years, at 6.6% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Gruma. de's prospects of growing its dividend payments in the future.
In Summary
In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Gruma. de's payments, as there could be some issues with sustaining them into the future. While Gruma. de is earning enough to cover the payments, the cash flows are lacking. We would probably look elsewhere for an income investment.
Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For instance, we've picked out 1 warning sign for Gruma. de that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
New: Manage All Your Stock Portfolios in One Place
We've created the ultimate portfolio companion for stock investors, and it's free.
• Connect an unlimited number of Portfolios and see your total in one currency
• Be alerted to new Warning Signs or Risks via email or mobile
• Track the Fair Value of your 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.
About BMV:GRUMA B
Gruma. de
Produces and sells corn flour, tortillas, and other related products.
Outstanding track record and undervalued.
