Wal-Mart de México, S.A.B. de C.V. (BMV:WALMEX) Passed Our Checks, And It's About To Pay A Mex$0.84 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 4 days. The ex-dividend date is commonly two business days 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. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Thus, you can purchase Wal-Mart de México. de's shares before the 18th of November in order to receive the dividend, which the company will pay on the 19th of November.

The company's next dividend payment will be Mex$0.84 per share. Last year, in total, the company distributed Mex$1.69 to shareholders. Looking at the last 12 months of distributions, Wal-Mart de México. de has a trailing yield of approximately 2.7% on its current stock price of Mex$62.39. If you buy this business for its dividend, you should have an idea of whether Wal-Mart de México. de's dividend is reliable and sustainable. So we need to investigate whether Wal-Mart de México. de can afford its dividend, and if the dividend could grow.

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Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Fortunately Wal-Mart de México. de's payout ratio is modest, at just 45% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. Thankfully its dividend payments took up just 48% of the free cash flow it generated, which is a comfortable payout ratio.

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.

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

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. 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 6.1% per annum 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.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Wal-Mart de México. de has seen its dividend decline 0.8% per annum on average over the past 10 years, which is not great to see.

The Bottom Line

From a dividend perspective, should investors buy or avoid Wal-Mart de México. de? 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.

On that note, you'll want to research what risks Wal-Mart de México. de is facing. Our analysis shows 1 warning sign for Wal-Mart de México. de and you should be aware of this before buying any shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.