Genomma Lab Internacional. de (BMV:LABB) Could Be A Buy For Its Upcoming Dividend

Readers hoping to buy Genomma Lab Internacional, S.A.B. de C.V. (BMV:LABB) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Therefore, if you purchase Genomma Lab Internacional. de's shares on or after the 17th of December, you won't be eligible to receive the dividend, when it is paid on the 18th of December.

The company's upcoming dividend is Mex$0.20 a share, following on from the last 12 months, when the company distributed a total of Mex$0.80 per share to shareholders. Based on the last year's worth of payments, Genomma Lab Internacional. de has a trailing yield of 2.9% on the current stock price of Mex$27.32. If you buy this business for its dividend, you should have an idea of whether Genomma Lab Internacional. de's dividend is reliable and sustainable. We need to see whether the dividend is covered by earnings and if it's growing.

View our latest analysis for Genomma Lab Internacional. de

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. Genomma Lab Internacional. de paid out just 12% of its profit last year, which we think is conservatively low and leaves plenty of margin for unexpected circumstances. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Fortunately, it paid out only 35% of its free cash flow in the past year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Genomma Lab Internacional. de earnings per share are up 9.4% per annum over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past three years, Genomma Lab Internacional. de has increased its dividend at approximately 28% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

Is Genomma Lab Internacional. de an attractive dividend stock, or better left on the shelf? Earnings per share have been growing moderately, and Genomma Lab Internacional. de is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but Genomma Lab Internacional. de is being conservative with its dividend payouts and could still perform reasonably over the long run. Overall we think this is an attractive combination and worthy of further research.

On that note, you'll want to research what risks Genomma Lab Internacional. de is facing. Every company has risks, and we've spotted 1 warning sign for Genomma Lab Internacional. de you should know about.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.