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

Grupo Herdez, S.A.B. de C.V. (BMV:HERDEZ) will pay a dividend of MX$0.60 on the 11th of October. This means the annual payment is 3.0% of the current stock price, which is above the average for the industry.

Check out our latest analysis for Grupo Herdez. de

Grupo Herdez. de's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. However, Grupo Herdez. de's earnings easily cover the dividend. As a result, a large proportion of what it earned was being reinvested back into the business.

Over the next year, EPS is forecast to expand by 10.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 34%, 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 dividend has gone from an annual total of MX$0.85 in 2013 to the most recent total annual payment of MX$1.20. This means that it has been growing its distributions at 3.5% per annum over that time. It's encouraging to see some dividend growth, but the dividend has been cut at least once, and the size of the cut would eliminate most of the growth anyway, which makes this less attractive as an income investment.

Grupo Herdez. de May Find It Hard To Grow The Dividend

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 have grown at around 4.6% a year for the past five years, which isn't massive but still better than seeing them shrink. While EPS growth is quite low, Grupo Herdez. de has the option to increase the payout ratio to return more cash to shareholders.

Our Thoughts On Grupo Herdez. de's Dividend

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 dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

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. Taking the debate a bit further, we've identified 3 warning signs for Grupo Herdez. de that investors need to be conscious of moving forward. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.