Gruma. de (BMV:GRUMAB) Is Paying Out A Larger Dividend Than Last Year

Gruma, S.A.B. de C.V.'s (BMV:GRUMAB) dividend will be increasing to Mex$1.35 on 7th of October. This will take the annual payment to 2.3% of the stock price, which is above what most companies in the industry pay.

Check out our latest analysis for Gruma. de

Gruma. de Is Paying Out More Than It Is Earning

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. 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.

Over the next year, EPS is forecast to expand by 2.1%. Assuming the dividend continues along recent trends, we think the payout ratio could get very high, which probably can't continue without starting to put some pressure on the balance sheet.

Gruma. de Doesn't Have A Long Payment History

Even though the company has been paying a consistent dividend for a while, we would like to see a few more years before we feel comfortable relying on it. The first annual payment during the last 8 years was US$0.12 in 2014, and the most recent fiscal year payment was US$0.26. This means that it has been growing its distributions at 11% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. Earnings per share has been crawling upwards at 2.4% per year. While EPS growth is quite low, Gruma. de has the option to increase the payout ratio to return more cash to shareholders.

In Summary

Overall, it's great to see the dividend being raised and that it is still 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. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Gruma. de that investors should know about before committing capital to this stock. Is Gruma. de not quite the opportunity you were looking for? Why not check out our selection of top 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.