Only Four Days Left To Cash In On Fomento Económico Mexicano. de's (BMV:FEMSAUBD) Dividend

Readers hoping to buy Fomento Económico Mexicano, S.A.B. de C.V. (BMV:FEMSAUBD) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase Fomento Económico Mexicano. de's shares before the 16th of October to receive the dividend, which will be paid on the 17th of October.

The company's next dividend payment will be Mex$1.8694 per share, on the back of last year when the company paid a total of Mex$4.40 to shareholders. Looking at the last 12 months of distributions, Fomento Económico Mexicano. de has a trailing yield of approximately 2.3% on its current stock price of Mex$191.51. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Fomento Económico Mexicano. de has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for Fomento Económico Mexicano. de

Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Fortunately Fomento Económico Mexicano. de's payout ratio is modest, at just 49% of profit. That said, even highly profitable companies sometimes might not generate enough cash to pay the dividend, which is why we should always check if the dividend is covered by cash flow. It distributed 49% of its free cash flow as dividends, a comfortable payout level for most companies.

It's positive to see that Fomento Económico Mexicano. de's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. With that in mind, we're encouraged by the steady growth at Fomento Económico Mexicano. de, with earnings per share up 7.8% on average over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the past 10 years, Fomento Económico Mexicano. de has increased its dividend at approximately 8.2% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

Final Takeaway

From a dividend perspective, should investors buy or avoid Fomento Económico Mexicano. de? Earnings per share growth has been growing somewhat, and Fomento Económico Mexicano. de is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. It might be nice to see earnings growing faster, but Fomento Económico Mexicano. de is being conservative with its dividend payouts and could still perform reasonably over the long run. Fomento Económico Mexicano. de looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

Wondering what the future holds for Fomento Económico Mexicano. de? See what the 15 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow

If you're in the market for strong dividend payers, we recommend checking 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.