There's A Lot To Like About Wal-Mart de México. de's (BMV:WALMEX) Upcoming Mex$1.09 Dividend

Wal-Mart de México, S.A.B. de C.V. (BMV:WALMEX) is about to trade ex-dividend in the next 3 days. 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Thus, you can purchase Wal-Mart de México. de's shares before the 9th of December in order to receive the dividend, which the company will pay on the 10th of December.

The company's next dividend payment will be Mex$1.09 per share. Last year, in total, the company distributed Mex$2.17 to shareholders. Calculating the last year's worth of payments shows that Wal-Mart de México. de has a trailing yield of 3.8% on the current share price of Mex$56.51. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Wal-Mart de México. de can afford its dividend, and if the dividend could grow.

View 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. Fortunately Wal-Mart de México. de's payout ratio is modest, at just 39% of profit. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. The good news is it paid out just 16% of its free cash flow in the last year.

It's positive to see that Wal-Mart de México. de's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

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. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. With that in mind, we're encouraged by the steady growth at Wal-Mart de México. de, with earnings per share up 7.9% on average over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. 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. Wal-Mart de México. de has delivered an average of 4.6% per year annual increase in its dividend, based on the past 10 years of dividend payments. 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.

The Bottom Line

Should investors buy Wal-Mart de México. de for the upcoming dividend? 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. There's a lot to like about Wal-Mart de México. de, and we would prioritise taking a closer look at it.

So while Wal-Mart de México. de looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 1 warning sign for Wal-Mart de México. de that you should be aware of before investing in their shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.