Fomento Económico Mexicano. de (BMV:FEMSAUBD) Will Pay 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 will take the annual payment to 7.1% of the stock price, which is above what most companies in the industry pay.

We've discovered 1 warning sign about Fomento Económico Mexicano. de. View them for free.

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 50.8% 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.

Check out 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 dividend has gone from MX$2.20 total annually to MX$14.69. This works out to be a compound annual growth rate (CAGR) of approximately 21% a year over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend's Growth Prospects Are Limited

Investors could be attracted to the stock based on the quality of its payment history. Fomento Económico Mexicano. de hasn't seen much change in its earnings per share over the last five years. Growth of 1.3% may indicate that the company has limited investment opportunity so it is returning its earnings to shareholders instead. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would probably look elsewhere for an income investment.

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. 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.