Fomento Económico Mexicano. de's (BMV:FEMSAUBD) Dividend Will Be MX$3.67

The board of Fomento Económico Mexicano, S.A.B. de C.V. (BMV:FEMSAUBD) has announced that it will pay a dividend on the 17th of October, with investors receiving MX$3.67 per share. This makes the dividend yield 8.6%, which is above the industry average.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Fomento Económico Mexicano. de's Future Dividends May Potentially Be At Risk

If the payments aren't sustainable, a high yield for a few years won't matter that much. Prior to this announcement, Fomento Económico Mexicano. de's dividend was making up a very large proportion of earnings and perhaps more concerning was that it was 319% of cash flows. Paying out such a high proportion of cash flows can expose the business to needing to cut the dividend if the business runs into some challenges.

The next 12 months is set to see EPS grow by 122.6%. If the dividend continues on its recent course, the payout ratio in 12 months could be 119%, which is a bit high and could start applying pressure to the balance sheet.

See 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

The company's investors will be pleased to have been receiving dividend income for some time. We are encouraged to see that Fomento Económico Mexicano. de has grown earnings per share at 18% per year over the past five years. Recently, the company has been able to grow earnings at a decent rate, but with the payout ratio on the higher end we don't think the dividend has many prospects for growth.

In Summary

Overall, we always like to see the dividend being raised, but we don't think Fomento Económico Mexicano. de will make a great income stock. Although they have been consistent in the past, we think the payments are a little high to be sustained. We would be a touch cautious of relying on this stock primarily for the dividend income.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Taking the debate a bit further, we've identified 2 warning signs for Fomento Económico Mexicano. de that investors need to be conscious of moving forward. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.