Fomento Económico Mexicano. de (BMV:FEMSAUBD) Is Increasing Its Dividend To MX$1.83

Fomento Económico Mexicano, S.A.B. de C.V. (BMV:FEMSAUBD) will increase its dividend from last year's comparable payment on the 7th of November to MX$1.83. The payment will take the dividend yield to 2.0%, which is in line with the average for the industry.

View our latest analysis for Fomento Económico Mexicano. de

Fomento Económico Mexicano. de's Payment Has Solid Earnings Coverage

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. The last dividend was quite easily covered by Fomento Económico Mexicano. de's earnings. This means that a large portion of its earnings are being retained to grow the business.

Over the next year, EPS is forecast to expand by 41.3%. If the dividend continues on this path, the payout ratio could be 34% by next year, which we think can be pretty sustainable going forward.

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$1.86 in 2013, and the most recent fiscal year payment was MX$3.66. This implies that the company grew its distributions at a yearly rate of about 7.0% over that duration. The growth of the dividend has been pretty reliable, so we think this can offer investors some nice additional income in their portfolio.

The Dividend's Growth Prospects Are Limited

The company's investors will be pleased to have been receiving dividend income for some time. Let's not jump to conclusions as things might not be as good as they appear on the surface. Over the past five years, it looks as though Fomento Económico Mexicano. de's EPS has declined at around 5.0% a year. If earnings continue declining, the company may have to make the difficult choice of reducing the dividend or even stopping it completely - the opposite of dividend growth. Earnings are forecast to grow over the next 12 months and if that happens we could still be a little bit cautious until it becomes a pattern.

Our Thoughts On Fomento Económico Mexicano. de's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The earnings coverage is acceptable for now, but with earnings on the decline we would definitely keep an eye on the payout ratio. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 1 warning sign for Fomento Económico Mexicano. de that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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