Fomento Económico Mexicano. de (BMV:FEMSAUBD) Is Due To Pay 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 17th of October. This will take the dividend yield to an attractive 8.6%, providing a nice boost to shareholder returns.

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Estimates Indicate Fomento Económico Mexicano. de's Could Struggle to Maintain Dividend Payments In The Future

While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. Before making this announcement, Fomento Económico Mexicano. de was paying out quite a large proportion of both earnings and cash flow, with the dividend being 319% of cash flows. Paying out such a high proportion of cash flows certainly exposes the company to cutting the dividend if cash flows were to reduce.

Over the next year, EPS is forecast to expand by 104.4%. However, if the dividend continues along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 130% over the next year.

Check out our latest analysis for Fomento Económico Mexicano. de

Fomento Económico Mexicano. de Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2015, the dividend has gone from MX$2.20 total annually to MX$14.69. This implies that the company grew its distributions at a yearly rate of about 21% over that duration. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

Fomento Económico Mexicano. de Might Find It Hard To Grow Its Dividend

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Fomento Económico Mexicano. de has grown earnings per share at 18% per year over the past five years. Past earnings growth has been decent, but unless this is one of those rare businesses that can grow without additional capital investment or marketing spend, we'd generally expect the higher payout ratio to limit its future growth prospects.

Our Thoughts On Fomento Económico Mexicano. de's Dividend

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. We can't deny that the payments have been very stable, but we are a little bit worried about the very high payout ratio. This company is not in the top tier of income providing stocks.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. As an example, we've identified 2 warning signs for Fomento Económico Mexicano. de that you should be aware of before investing. 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.