Gruma. de's (BMV:GRUMAB) Dividend Will Be $1.35

Gruma, S.A.B. de C.V. (BMV:GRUMAB) has announced that it will pay a dividend of $1.35 per share on the 6th of October. Based on this payment, the dividend yield will be 1.7%, which is fairly typical for the industry.

See our latest analysis for Gruma. de

Gruma. de Is Paying Out More Than It Is Earning

Unless the payments are sustainable, the dividend yield doesn't mean too much. Prior to this announcement, Gruma. de's dividend was only 31% 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 5.4% 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.

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 annual payment during the last 9 years was $0.116 in 2014, and the most recent fiscal year payment was $0.3. 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.

The Dividend Has Growth Potential

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Gruma. de has seen EPS rising for the last five years, at 6.6% per annum. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.

In Summary

Overall, it's nice to see a consistent dividend payment, but we think that longer term, the current level of payment might be unsustainable. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. See if the 10 Gruma. de analysts we track are forecasting continued growth with our free report on analyst estimates for the company. 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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