Bolsa Mexicana de Valores. de's (BMV:BOLSAA) Dividend Is Being Reduced To MX$2.12

Bolsa Mexicana de Valores, S.A.B. de C.V. (BMV:BOLSAA) is reducing its dividend to MX$2.12 on the 13th of Maywhich is 7.8% less than last year's comparable payment of MX$2.30. This means the annual payment is 7.0% of the current stock price, which is above the average for the industry.

View our latest analysis for Bolsa Mexicana de Valores. de

Bolsa Mexicana de Valores. de's Payment Has Solid Earnings Coverage

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Prior to this announcement, Bolsa Mexicana de Valores. de was paying out 91% of earnings and more than 75% of free cash flows. This is usually an indication that the focus of the company is returning cash to shareholders rather than reinvesting it for growth.

The next year is set to see EPS grow by 20.5%. If the dividend continues along recent trends, we estimate the payout ratio will be 75%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

Bolsa Mexicana de Valores. de Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. Since 2014, the annual payment back then was MX$1.09, compared to the most recent full-year payment of MX$2.30. This means that it has been growing its distributions at 7.8% per annum over that time. The dividend has been growing very nicely for a number of years, and has given its shareholders some nice income in their portfolios.

Dividend Growth May Be Hard To Achieve

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. However, Bolsa Mexicana de Valores. de's EPS was effectively flat over the past five years, which could stop the company from paying more every year. Earnings are not growing quickly at all, and the company is paying out most of its profit as dividends. That's fine as far as it goes, but we're less enthusiastic as this often signals that the dividend is likely to grow slower in the future.

In Summary

In summary, dividends being cut isn't ideal, however it can bring the payment into a more sustainable range. The payout levels might be a bit high for our liking, but we can't deny that until now, the payments have been pretty consistent. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. 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 Bolsa Mexicana de Valores. de that investors need to be conscious of moving forward. Is Bolsa Mexicana de Valores. de not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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