Fomento Económico Mexicano. de (BMV:FEMSAUBD) Will Pay A Larger Dividend Than Last Year At MX$1.83

Fomento Económico Mexicano, S.A.B. de C.V. (BMV:FEMSAUBD) has announced that it will be increasing its dividend from last year's comparable payment on the 7th of November to MX$1.83. Based on this payment, the dividend yield for the company will be 1.9%, which is fairly typical for the industry.

Check out our latest analysis for Fomento Económico Mexicano. de

Fomento Económico Mexicano. de's Dividend Is Well Covered By Earnings

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. However, prior to this announcement, Fomento Económico Mexicano. de's dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

Looking forward, earnings per share is forecast to rise by 22.7% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 34%, which is in the range that makes us comfortable with the sustainability of the dividend.

Fomento Económico Mexicano. de Has A Solid Track Record

The company has an extended history of paying stable dividends. The dividend has gone from an annual total of MX$2.00 in 2013 to the most recent total annual payment of MX$3.66. This means that it has been growing its distributions at 6.2% per annum over that time. Companies like this can be very valuable over the long term, if the decent rate of growth can be maintained.

Dividend Growth May Be Hard To Achieve

Investors could be attracted to the stock based on the quality of its payment history. Unfortunately things aren't as good as they seem. Over the past five years, it looks as though Fomento Económico Mexicano. de's EPS has declined at around 4.7% a year. If the company is making less over time, it naturally follows that it will also have to pay out less in dividends. It's not all bad news though, as the earnings are predicted to rise over the next 12 months - we would just be a bit cautious until this can turn into a longer term trend.

Our Thoughts On Fomento Económico Mexicano. de's Dividend

Overall, it's great to see the dividend being raised and that it is still in a sustainable range. With shrinking earnings, the company may see some issues maintaining the dividend even though they look pretty sustainable for now. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular 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.