Stock Analysis

Why You Might Be Interested In Grupo Nacional Provincial, S.A.B. (BMV:GNP) For Its Upcoming Dividend

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Grupo Nacional Provincial, S.A.B. (BMV:GNP) stock is about to trade ex-dividend in three days. If you purchase the stock on or after the 26th of November, you won't be eligible to receive this dividend, when it is paid on the 30th of November.

Grupo Nacional Provincial's next dividend payment will be Mex$9.90 per share, which looks like a nice increase on last year, when the company distributed a total of Mex$8.93 to shareholders. If you buy this business for its dividend, you should have an idea of whether Grupo Nacional Provincial's dividend is reliable and sustainable. As a result, readers should always check whether Grupo Nacional Provincial has been able to grow its dividends, or if the dividend might be cut.

Check out our latest analysis for Grupo Nacional Provincial

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. It paid out 82% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be concerned if earnings began to decline.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see how much of its profit Grupo Nacional Provincial paid out over the last 12 months.

BMV:GNP * Historic Dividend November 22nd 2020

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see Grupo Nacional Provincial's earnings have been skyrocketing, up 82% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Grupo Nacional Provincial has delivered an average of 19% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.

Final Takeaway

Is Grupo Nacional Provincial an attractive dividend stock, or better left on the shelf? Grupo Nacional Provincial has an acceptable payout ratio and its earnings per share have been improving at a decent rate. Overall, Grupo Nacional Provincial looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

While it's tempting to invest in Grupo Nacional Provincial for the dividends alone, you should always be mindful of the risks involved. For example - Grupo Nacional Provincial has 2 warning signs we think you should be aware of.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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Valuation is complex, but we're helping make it simple.

Find out whether Grupo Nacional Provincial is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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This article by Simply Wall St is general in nature. 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.
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