GMéxico Transportes. de (BMV:GMXT) Is Due To Pay A Dividend Of MX$0.50

The board of GMéxico Transportes, S.A.B. de C.V. (BMV:GMXT) has announced that it will pay a dividend on the 26th of May, with investors receiving MX$0.50 per share. Based on this payment, the dividend yield on the company's stock will be 5.8%, which is an attractive boost to shareholder returns.

We've discovered 1 warning sign about GMéxico Transportes. de. View them for free.

Estimates Indicate GMéxico Transportes. de's Could Struggle to Maintain Dividend Payments In The Future

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, the company was paying out 100% of what it was earning, however the dividend was quite comfortably covered by free cash flows at a cash payout ratio of only 74%. Generally, we think cash is more important than accounting measures of profit, so with the cash flows easily covering the dividend, we don't think there is much reason to worry.

The next 12 months is set to see EPS grow by 21.5%. Assuming the dividend continues along recent trends, we think the payout ratio could reach 99%, which probably can't continue without putting some pressure on the balance sheet.

Check out our latest analysis for GMéxico Transportes. de

GMéxico Transportes. de Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. Since 2018, the dividend has gone from MX$0.15 total annually to MX$2.00. This works out to be a compound annual growth rate (CAGR) of approximately 45% a year over that time. GMéxico Transportes. de has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. However, GMéxico Transportes. de has only grown its earnings per share at 4.4% per annum over the past five years. The earnings growth is anaemic, and the company is paying out 100% of its profit. This gives limited room for the company to raise the dividend in the future.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about GMéxico Transportes. de's payments, as there could be some issues with sustaining them into the future. In the past, the payments have been unstable, but over the short term the dividend could be reliable, with the company generating enough cash to cover it. This company is not in the top tier of income providing stocks.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for GMéxico Transportes. de that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of 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.