Wal-Mart de México. de's (BMV:WALMEX) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of Wal-Mart de México, S.A.B. de C.V. (BMV:WALMEX) has announced that it will be paying its dividend of MX$0.97 on the 29th of November, an increased payment from last year's comparable dividend. This will take the dividend yield to an attractive 3.8%, providing a nice boost to shareholder returns.

See our latest analysis for Wal-Mart de México. de

Wal-Mart de México. de's Payment Has Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, Wal-Mart de México. de was paying a whopping 109% as a dividend, but this only made up 40% of its overall earnings. The business might be trying to strike a balance between returning cash to shareholders and reinvesting back into the business, but this high of a payout ratio could definitely force the dividend to be cut if the company runs into a bit of a tough spot.

Looking forward, earnings per share is forecast to rise by 37.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 73%, 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

The company has an extended history of paying stable dividends. Since 2013, the annual payment back then was MX$0.92, compared to the most recent full-year payment of MX$2.69. This works out to be a compound annual growth rate (CAGR) of approximately 11% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Wal-Mart de México. de Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see that Wal-Mart de México. de has been growing its earnings per share at 8.6% a year over the past five years. Wal-Mart de México. de definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Wal-Mart de México. de's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 1 warning sign for Wal-Mart de México. de that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated 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.