Grupo Herdez. de's (BMV:HERDEZ) Dividend Will Be MX$0.75

Grupo Herdez, S.A.B. de C.V. (BMV:HERDEZ) has announced that it will pay a dividend of MX$0.75 per share on the 7th of October. Based on this payment, the dividend yield on the company's stock will be 2.7%, which is an attractive boost to shareholder returns.

We've discovered 1 warning sign about Grupo Herdez. de. View them for free.

Grupo Herdez. de's Payment Could Potentially Have Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. However, Grupo Herdez. de's earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.

If the trend of the last few years continues, EPS will grow by 11.6% over the next 12 months. If the dividend continues on this path, the payout ratio could be 53% by next year, which we think can be pretty sustainable going forward.

Check out our latest analysis for Grupo Herdez. de

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2015, the annual payment back then was MX$0.90, compared to the most recent full-year payment of MX$1.50. This works out to be a compound annual growth rate (CAGR) of approximately 5.2% a year over that time. A reasonable rate of dividend growth is good to see, but we're wary that the dividend history is not as solid as we'd like, having been cut at least once.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to see if earnings per share is growing. Grupo Herdez. de has impressed us by growing EPS at 12% per year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

We Really Like Grupo Herdez. de's Dividend

Overall, we think that this is a great income investment, and we think that maintaining the dividend this year may have been a conservative choice. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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 1 warning sign for Grupo Herdez. 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.