Wal-Mart de México, S.A.B. de C.V. (BMV:WALMEX) will increase its dividend from last year's comparable payment on the 22nd of November to MX$0.85. This takes the annual payment to 2.3% of the current stock price, which is about average for the industry.
Wal-Mart de México. de's Earnings Easily Cover the Distributions
While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. Before making this announcement, Wal-Mart de México. de was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS is forecast to expand by 35.8%. If the dividend continues along recent trends, we estimate the payout ratio will be 52%, which is in the range that makes us comfortable with the sustainability of the dividend.
Wal-Mart de México. de Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was MX$0.55 in 2012, and the most recent fiscal year payment was MX$1.71. This implies that the company grew its distributions at a yearly rate of about 12% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.
The Dividend Has Growth Potential
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that Wal-Mart de México. de has grown earnings per share at 9.2% per year over the past five years. A low payout ratio and decent growth suggests that the company is reinvesting well, and it also has plenty of room to increase the dividend over time.
We Really Like Wal-Mart de México. de's Dividend
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Earnings growth generally bodes well for the future value of company dividend payments. See if the 13 Wal-Mart de México. de analysts we track are forecasting continued growth with our free report on analyst estimates for the company. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.
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