Cydsa. de (BMV:CYDSASAA) Has Announced That It Will Be Increasing Its Dividend To MX$0.6587

Cydsa, S.A.B. de C.V.'s (BMV:CYDSASAA) periodic dividend will be increasing on the 7th of April to MX$0.6587, with investors receiving 19% more than last year's MX$0.555. The payment will take the dividend yield to 3.1%, which is in line with the average for the industry.

Cydsa. de's Projected Earnings Seem Likely To Cover Future Distributions

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, Cydsa. de was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

If the company can't turn things around, EPS could fall by 13.5% over the next year. However, if the dividend continues along recent trends, we estimate the payout ratio could reach 78%, meaning that most of the company's earnings is being paid out to shareholders.

Check out our latest analysis for Cydsa. de

Dividend Volatility

The company's dividend history has been marked by instability, with at least one cut in the last 10 years. The annual payment during the last 10 years was MX$0.391 in 2015, and the most recent fiscal year payment was MX$0.555. This implies that the company grew its distributions at a yearly rate of about 3.6% over that duration. Modest growth in the dividend is good to see, but we think this is offset by historical cuts to the payments. It is hard to live on a dividend income if the company's earnings are not consistent.

The Dividend Has Limited Growth Potential

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. Over the past five years, it looks as though Cydsa. de's EPS has declined at around 13% a year. Such rapid declines definitely have the potential to constrain dividend payments if the trend continues into the future.

Our Thoughts On Cydsa. de's Dividend

Overall, we always like to see the dividend being raised, but we don't think Cydsa. de will make a great income stock. The payments haven't been particularly stable and we don't see huge growth potential, but with the dividend well covered by cash flows it could prove to be reliable over the short term. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 3 warning signs for Cydsa. de you should be aware of, and 1 of them is a bit unpleasant. Is Cydsa. 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.