Gruma. de (BMV:GRUMAB) Will Pay A Larger Dividend Than Last Year At $1.35

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 10th of April to $1.35. This takes the dividend yield to 1.9%, which shareholders will be pleased with.

Check out our latest analysis for Gruma. de

Gruma. de Doesn't Earn Enough To Cover Its Payments

A big dividend yield for a few years doesn't mean much if it can't be sustained. Gruma. de is quite easily earning enough to cover the dividend, however it is being let down by weak cash flows. We think that cash flows should take priority over earnings, so this is definitely a worry for the dividend going forward.

The next 12 months is set to see EPS grow by 51.1%. 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.

Gruma. de Is Still Building Its Track Record

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. The dividend has gone from an annual total of $0.116 in 2015 to the most recent total annual payment of $0.259. This means that it has been growing its distributions at 11% per annum over that time. It is always nice to see strong dividend growth, but with such a short payment history we wouldn't be inclined to rely on it until a longer track record can be developed.

Gruma. de May Find It Hard To Grow The Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, Gruma. de's EPS was effectively flat over the past five years, which could stop the company from paying more every 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, this is probably not a great income stock, even though the dividend is being raised at the moment. While Gruma. de is earning enough to cover the payments, the cash flows are lacking. We don't think Gruma. de is a great stock to add to your portfolio if income is your focus.

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 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.

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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.