Here's What We Like About Wal-Mart de México. de's (BMV:WALMEX) Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Wal-Mart de México, S.A.B. de C.V. (BMV:WALMEX) is about to trade ex-dividend in the next three days. You can purchase shares before the 23rd of November in order to receive the dividend, which the company will pay on the 25th of November.

Wal-Mart de México. de's next dividend payment will be Mex$0.75 per share. Last year, in total, the company distributed Mex$1.79 to shareholders. Looking at the last 12 months of distributions, Wal-Mart de México. de has a trailing yield of approximately 3.1% on its current stock price of MX$57.05. 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 Wal-Mart de México. de can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Wal-Mart de México. de

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Wal-Mart de México. de paid out a comfortable 48% of its profit last year. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Luckily it paid out just 23% of its free cash flow last 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?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Wal-Mart de México. de earnings per share are up 5.1% 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Wal-Mart de México. de has delivered 18% dividend growth per year on average over the past 10 years. 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

Has Wal-Mart de México. de got what it takes to maintain its dividend payments? Earnings per share have been growing moderately, and Wal-Mart de México. 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 Wal-Mart de México. 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.

Curious what other investors think of Wal-Mart de México. de? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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