Wal-Mart de México, S.A.B. de C.V. (BMV:WALMEX) Passed Our Checks, And It's About To Pay A Mex$0.85 Dividend

It looks like Wal-Mart de México, S.A.B. de C.V. (BMV:WALMEX) is about to go ex-dividend in the next four days. The ex-dividend date is commonly two business days 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Wal-Mart de México. de's shares before the 16th of December to receive the dividend, which will be paid on the 17th of December.

The company's upcoming dividend is Mex$0.85 a share, following on from the last 12 months, when the company distributed a total of Mex$1.69 per share to shareholders. Based on the last year's worth of payments, Wal-Mart de México. de stock has a trailing yield of around 2.9% on the current share price of Mex$58.57. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.

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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. Wal-Mart de México. de paid out a comfortable 45% of its profit last year. A useful secondary check can be to evaluate whether Wal-Mart de México. de generated enough free cash flow to afford its dividend. It distributed 48% of its free cash flow as dividends, a comfortable payout level for most companies.

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.

Check out our latest analysis for Wal-Mart de México. de

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

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we're encouraged by the steady growth at Wal-Mart de México. de, with earnings per share up 6.1% on average over the last five years. Management have been reinvested more than half of the company's earnings within the business, and the company has been able to grow earnings with this retained capital. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. Wal-Mart de México. de has seen its dividend decline 0.8% per annum on average over the past 10 years, which is not great to see.

The Bottom Line

Has Wal-Mart de México. de got what it takes to maintain its dividend payments? Earnings per share growth has been growing somewhat, and Wal-Mart de México. 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 Wal-Mart de México. de is being conservative with its dividend payouts and could still perform reasonably over the long run. It's a promising combination that should mark this company worthy of closer attention.

In light of that, while Wal-Mart de México. de has an appealing dividend, it's worth knowing the risks involved with this stock. In terms of investment risks, we've identified 1 warning sign with Wal-Mart de México. de and understanding them should be part of your investment process.

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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.