Grupo Herdez. de (BMV:HERDEZ) Is Due To Pay A Dividend Of MX$0.60

Grupo Herdez, S.A.B. de C.V.'s (BMV:HERDEZ) investors are due to receive a payment of MX$0.60 per share on 11th of October. This makes the dividend yield 2.5%, which will augment investor returns quite nicely.

View our latest analysis for Grupo Herdez. de

Grupo Herdez. de's Earnings Easily Cover The Distributions

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last dividend was quite easily covered by Grupo Herdez. de's earnings. This means that a large portion of its earnings are being retained to grow the business.

The next year is set to see EPS grow by 3.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 43%, which is in the range that makes us comfortable with the sustainability of the dividend.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was MX$0.85 in 2013, and the most recent fiscal year payment was MX$1.20. This works out to be a compound annual growth rate (CAGR) of approximately 3.5% a year over that time. The dividend has seen some fluctuations in the past, so even though the dividend was raised this year, we should remember that it has been cut in the past.

Dividend Growth May Be Hard To Achieve

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Earnings per share has been crawling upwards at 3.5% per year. The company has been growing at a pretty soft 3.5% per annum, and is paying out quite a lot of its earnings to shareholders. This isn't necessarily bad, but we wouldn't expect rapid dividend growth in the future.

In Summary

Overall, a consistent dividend is a good thing, and we think that Grupo Herdez. de has the ability to continue this into the future. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. The payment isn't stellar, but it could make a decent addition to a dividend portfolio.

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. To that end, Grupo Herdez. de has 3 warning signs (and 1 which is a bit concerning) we think you should know about. Is Grupo Herdez. de not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.