Grupo México. de (BMV:GMEXICOB) Will Pay A Larger Dividend Than Last Year At $1.20

Grupo México, S.A.B. de C.V.'s (BMV:GMEXICOB) dividend will be increasing from last year's payment of the same period to $1.20 on 27th of May. The payment will take the dividend yield to 4.4%, which is in line with the average for the industry.

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Grupo México. de's Future Dividends May Potentially Be At Risk

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Prior to this announcement, Grupo México. de's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

Over the next year, EPS is forecast to expand by 10.4%. If the dividend continues on its recent course, the company could be paying out several times what it earns in the next 12 months, which could start applying pressure to the balance sheet.

See our latest analysis for Grupo México. 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. The dividend has gone from an annual total of $0.0628 in 2015 to the most recent total annual payment of $0.234. This works out to be a compound annual growth rate (CAGR) of approximately 14% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. We are encouraged to see that Grupo México. de has grown earnings per share at 25% per year over the past five years. The company's earnings per share has grown rapidly in recent years, and it has a good balance between reinvesting and paying dividends to shareholders, so we think that Grupo México. de could prove to be a strong dividend payer.

We Really Like Grupo México. de's Dividend

Overall, a dividend increase is always good, and we think that Grupo México. de is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Grupo México. de that you should be aware of before investing. 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.