Fomento Económico Mexicano. de (BMV:FEMSAUBD) Has Announced A Dividend Of MX$3.67

Fomento Económico Mexicano, S.A.B. de C.V. (BMV:FEMSAUBD) will pay a dividend of MX$3.67 on the 18th of July. This takes the dividend yield to 7.1%, which shareholders will be pleased with.

Our free stock report includes 1 warning sign investors should be aware of before investing in Fomento Económico Mexicano. de. Read for free now.

Fomento Económico Mexicano. de's Projections Indicate Future Payments May Be Unsustainable

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last payment was quite easily covered by earnings, but it made up 320% of cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Earnings per share is forecast to rise by 49.0% over the next year. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 105% over the next year.

View our latest analysis for Fomento Económico Mexicano. de

Fomento Económico Mexicano. de Has A Solid Track Record

The company has an extended history of paying stable dividends. The annual payment during the last 10 years was MX$2.20 in 2015, and the most recent fiscal year payment was MX$14.69. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Dividend Growth May Be Hard To Achieve

The company's investors will be pleased to have been receiving dividend income for some time. Unfortunately, Fomento Económico Mexicano. de's earnings per share has been essentially flat over the past five years, which means the dividend may not be increased each year. Growth of 0.7% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. While this isn't necessarily a negative, it definitely signals that dividend growth could be constrained in the future unless earnings start to pick up again.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Fomento Económico Mexicano. de will make a great income stock. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

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. For instance, we've picked out 1 warning sign for Fomento Económico Mexicano. de that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.