Corporación Moctezuma, S.A.B. de C.V. (BMV:CMOCTEZ) Passed Our Checks, And It's About To Pay A Mex$2.00 Dividend

Readers hoping to buy Corporación Moctezuma, S.A.B. de C.V. (BMV:CMOCTEZ) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. This means that investors who purchase Corporación Moctezuma. de's shares on or after the 13th of December will not receive the dividend, which will be paid on the 16th of December.

The company's next dividend payment will be Mex$2.00 per share. Last year, in total, the company distributed Mex$6.00 to shareholders. Based on the last year's worth of payments, Corporación Moctezuma. de stock has a trailing yield of around 8.6% on the current share price of Mex$70.12. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Corporación Moctezuma. de can afford its dividend, and if the dividend could grow.

Check out our latest analysis for Corporación Moctezuma. de

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Corporación Moctezuma. de paid out a comfortable 38% of its profit last year. 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. Over the last year, it paid out more than three-quarters (88%) of its free cash flow generated, which is fairly high and may be starting to limit reinvestment in the business.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see how much of its profit Corporación Moctezuma. de paid out over the last 12 months.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see Corporación Moctezuma. de earnings per share are up 9.6% per annum over the last five years. Decent historical earnings per share growth suggests Corporación Moctezuma. de has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. Therefore it's unlikely that the company will be able to reinvest heavily in its business, which could presage slower growth in the future.

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, Corporación Moctezuma. de has increased its dividend at approximately 12% a year on average. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

The Bottom Line

Is Corporación Moctezuma. de an attractive dividend stock, or better left on the shelf? Earnings per share growth has been modest, and it's interesting that Corporación Moctezuma. de is paying out less than half of its earnings and more than half its cash flow to shareholders in the form of dividends. All things considered, we are not particularly enthused about Corporación Moctezuma. de from a dividend perspective.

In light of that, while Corporación Moctezuma. de has an appealing dividend, it's worth knowing the risks involved with this stock. We've identified 3 warning signs with Corporación Moctezuma. de (at least 2 which shouldn't be ignored), and understanding them should be part of your investment process.

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.