Is Bolsa Mexicana de Valores, S.A.B. de C.V. (BMV:BOLSAA) A Smart Choice For Dividend Investors?

Dividend paying stocks like Bolsa Mexicana de Valores, S.A.B. de C.V. (BMV:BOLSAA) tend to be popular with investors, and for good reason - some research suggests a significant amount of all stock market returns come from reinvested dividends. Unfortunately, it's common for investors to be enticed in by the seemingly attractive yield, and lose money when the company has to cut its dividend payments.

A high yield and a long history of paying dividends is an appealing combination for Bolsa Mexicana de Valores. de. We'd guess that plenty of investors have purchased it for the income. Some simple analysis can offer a lot of insights when buying a company for its dividend, and we'll go through this below.

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Payout ratios

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Comparing dividend payments to a company's net profit after tax is a simple way of reality-checking whether a dividend is sustainable. Looking at the data, we can see that 68% of Bolsa Mexicana de Valores. de's profits were paid out as dividends in the last 12 months. This is a healthy payout ratio, and while it does limit the amount of earnings that can be reinvested in the business, there is also some room to lift the payout ratio over time.

We update our data on Bolsa Mexicana de Valores. de every 24 hours, so you can always get our latest analysis of its financial health, here.

Dividend Volatility

Before buying a stock for its income, we want to see if the dividends have been stable in the past, and if the company has a track record of maintaining its dividend. Bolsa Mexicana de Valores. de has been paying dividends for a long time, but for the purpose of this analysis, we only examine the past 10 years of payments. During this period the dividend has been stable, which could imply the business could have relatively consistent earnings power. During the past 10-year period, the first annual payment was Mex$0.7 in 2010, compared to Mex$1.8 last year. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year over that time.

Dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Dividend Growth Potential

While dividend payments have been relatively reliable, it would also be nice if earnings per share (EPS) were growing, as this is essential to maintaining the dividend's purchasing power over the long term. It's good to see Bolsa Mexicana de Valores. de has been growing its earnings per share at 26% a year over the past five years. With recent, rapid earnings per share growth and a payout ratio of 68%, this business looks like an interesting prospect if earnings are reinvested effectively.

Conclusion

Dividend investors should always want to know if a) a company's dividends are affordable, b) if there is a track record of consistent payments, and c) if the dividend is capable of growing. Bolsa Mexicana de Valores. de's payout ratio is within normal bounds. That said, we were glad to see it growing earnings and paying a fairly consistent dividend. Bolsa Mexicana de Valores. de has a number of positive attributes, but falls short of our ideal dividend company. It may be worth a look at the right price, though.

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. Earnings growth generally bodes well for the future value of company dividend payments. See if the 7 Bolsa Mexicana de Valores. 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 curated list of dividend stocks with a yield above 3%.

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This article by Simply Wall St is general in nature. 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.
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