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

Gruma, S.A.B. de C.V. (BMV:GRUMAB) has announced that it will be increasing its dividend from last year's comparable payment on the 11th of July to $1.44. 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 to see a healthy dividend yield, but that is only helpful to us if the payment can continue. 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.

Earnings per share is forecast to rise by 10.4% over the next year. 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.

Check out our latest analysis for Gruma. de

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. Since 2015, the annual payment back then was $0.116, compared to the most recent full-year payment of $0.293. This means that it has been growing its distributions at 9.7% per annum over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Gruma. de might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's encouraging to see that Gruma. de has been growing its earnings per share at 28% a year over the past five years. Earnings per share is growing at a solid clip, and the payout ratio is low which we think is an ideal combination in a dividend stock as the company can quite easily raise the dividend in the future.

Gruma. de Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. 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. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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