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

Fomento Económico Mexicano, S.A.B. de C.V.'s (BMV:FEMSAUBD) investors are due to receive a payment of MX$3.67 per share on 18th of July. This takes the dividend yield to 7.4%, which shareholders will be pleased with.

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

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Based on the last dividend, Fomento Económico Mexicano. de is earning enough to cover the payment, but then it makes up 310% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

Earnings per share is forecast to rise by 49.5% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could reach 101%, which probably can't continue without putting some pressure on the balance sheet.

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. Since 2015, the annual payment back then was MX$2.20, compared to the most recent full-year payment of MX$14.69. This means that it has been growing its distributions at 21% per annum over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Fomento Económico Mexicano. de May Find It Hard To Grow The Dividend

Investors could be attracted to the stock based on the quality of its payment history. However, Fomento Económico Mexicano. de's EPS was effectively flat over the past five years, which could stop the company from paying more every year. Fomento Económico Mexicano. de is struggling to find viable investments, so it is returning more to shareholders. This could mean the dividend doesn't have the growth potential we look for going into the future.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Fomento Económico Mexicano. 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. We would be a touch cautious of relying on this stock primarily for the dividend income.

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. Is Fomento Económico Mexicano. de not quite the opportunity you were looking for? Why not check out 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.