Fomento Económico Mexicano. de (BMV:FEMSAUBD) Is Increasing Its Dividend To MX$3.67

The board of Fomento Económico Mexicano, S.A.B. de C.V. (BMV:FEMSAUBD) has announced that it will be paying its dividend of MX$3.67 on the 25th of April, an increased payment from last year's comparable dividend. This will take the annual payment to 7.1% of the stock price, which is above what most companies in the industry pay.

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Fomento Económico Mexicano. de's Future Dividend Projections Appear Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. Based on the last dividend, Fomento Económico Mexicano. de is earning enough to cover the payment, but then it makes up 202% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.

Earnings per share is forecast to rise by 41.6% over the next year. Assuming the dividend continues along recent trends, our estimates say the payout ratio could reach 91% - on the higher side, but we wouldn't necessarily say this is unsustainable.

See our latest analysis for Fomento Económico Mexicano. de

Fomento Económico Mexicano. de Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. 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.

We Could See Fomento Económico Mexicano. de's Dividend Growing

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. Fomento Económico Mexicano. de has seen EPS rising for the last five years, at 5.8% per annum. The company is paying out a lot of its cash as a dividend, but it looks okay based on the payout ratio.

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. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We don't think Fomento Económico Mexicano. de is a great stock to add to your portfolio if income is your focus.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. 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.