Industrias Bachoco. de's (NYSE:IBA) Dividend Will Be Increased To US$0.42

Industrias Bachoco, S.A.B. de C.V. (NYSE:IBA) will increase its dividend on the 26th of July to US$0.42. Even though the dividend went up, the yield is still quite low at only 1.8%.

Check out our latest analysis for Industrias Bachoco. de

Industrias Bachoco. de's Payment Has Solid Earnings Coverage

If it is predictable over a long period, even low dividend yields can be attractive. Before making this announcement, Industrias Bachoco. de was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share is forecast to rise by 21.7% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 0.9% by next year, which is in a pretty sustainable range.

Dividend Volatility

The company's dividend history has been marked by instability, with at least 1 cut in the last 10 years. Since 2011, the first annual payment was Mex$5.00, compared to the most recent full-year payment of Mex$17.04. This means that it has been growing its distributions at 13% per annum 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.

Dividend Growth May Be Hard To Achieve

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. Earnings have grown at around 4.2% a year for the past five years, which isn't massive but still better than seeing them shrink. Earnings growth is slow, but on the plus side, the dividend payout ratio is low and dividends could grow faster than earnings, if the company decides to increase its payout ratio.

In Summary

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. While the payout ratios are a good sign, we are less enthusiastic about the company's dividend record. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 2 warning signs for Industrias Bachoco. de that investors should know about before committing capital to this stock. We have also put together a list of global stocks with a solid dividend.

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