We Wouldn't Be Too Quick To Buy GMéxico Transportes, S.A.B. de C.V. (BMV:GMXT) Before It Goes Ex-Dividend

Readers hoping to buy GMéxico Transportes, S.A.B. de C.V. (BMV:GMXT) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Meaning, you will need to purchase GMéxico Transportes. de's shares before the 23rd of August to receive the dividend, which will be paid on the 26th of August.

The company's next dividend payment will be Mex$0.50 per share, on the back of last year when the company paid a total of Mex$2.00 to shareholders. Based on the last year's worth of payments, GMéxico Transportes. de has a trailing yield of 5.6% on the current stock price of Mex$35.41. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether GMéxico Transportes. de can afford its dividend, and if the dividend could grow.

See our latest analysis for GMéxico Transportes. de

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Last year GMéxico Transportes. de paid out 96% of its profits as dividends to shareholders, suggesting the dividend is not well covered by earnings. A useful secondary check can be to evaluate whether GMéxico Transportes. de generated enough free cash flow to afford its dividend. Dividends consumed 69% of the company's free cash flow last year, which is within a normal range for most dividend-paying organisations.

It's good to see that while GMéxico Transportes. de's dividends were not well covered by profits, at least they are affordable from a cash perspective. Still, if the company continues paying out such a high percentage of its profits, the dividend could be at risk if business turns sour.

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

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 earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at GMéxico Transportes. de, with earnings per share up 3.9% on average over the last five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, seven years ago, GMéxico Transportes. de has lifted its dividend by approximately 45% 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.

To Sum It Up

Is GMéxico Transportes. de worth buying for its dividend? While earnings per share have been growing slowly, GMéxico Transportes. de is paying out an uncomfortably high percentage of its earnings. However it did pay out a lower percentage of its cashflow. It's not the most attractive proposition from a dividend perspective, and we'd probably give this one a miss for now.

With that being said, if you're still considering GMéxico Transportes. de as an investment, you'll find it beneficial to know what risks this stock is facing. To help with this, we've discovered 1 warning sign for GMéxico Transportes. de that you should be aware of before investing in their shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.