The board of Gruma, S.A.B. de C.V. (BMV:GRUMAB) has announced that it will pay a dividend on the 12th of January, with investors receiving $1.35 per share. This means that the annual payment will be 1.6% of the current stock price, which is in line with the average for the industry.
See our latest analysis for Gruma. de
Gruma. de Is Paying Out More Than It Is Earning
Solid dividend yields are great, but they only really help us if 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.
Earnings per share is forecast to rise by 13.1% 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 Is Still Building Its Track Record
The dividend's track record has been pretty solid, but with only 9 years of history we want to see a few more years of history before making any solid conclusions. Since 2014, the dividend has gone from $0.116 total annually to $0.295. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. Gruma. de has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.
We Could See Gruma. de's Dividend Growing
Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Gruma. de has grown earnings per share at 8.7% per year over the past five years. Gruma. de definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.
Gruma. de Looks Like A Great Dividend Stock
Overall, we like to see the dividend staying consistent, and we think Gruma. de might even raise payments in the future. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.
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. Taking the debate a bit further, we've identified 1 warning sign for Gruma. de that investors need to be conscious of moving forward. 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 with excellent balance sheet.
