Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Wal-Mart de México, S.A.B. de C.V. (BMV:WALMEX) is about to trade ex-dividend in the next 3 days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. 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. Accordingly, Wal-Mart de México. de investors that purchase the stock on or after the 17th of November will not receive the dividend, which will be paid on the 18th of November.

The company's next dividend payment will be Mex$0.58 per share, and in the last 12 months, the company paid a total of Mex$1.16 per share. Looking at the last 12 months of distributions, Wal-Mart de México. de has a trailing yield of approximately 2.1% on its current stock price of Mex$54.30. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to investigate whether Wal-Mart de México. de can afford its dividend, and if the dividend could grow.

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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. Wal-Mart de México. de paid out a comfortable 41% of its profit last year. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year it paid out 53% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that Wal-Mart de México. 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.

See 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 8.5% on average over the last five years. Decent historical earnings per share growth suggests Wal-Mart de México. 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.

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 3.6% per annum on average over the past 10 years, which is not great to see. Wal-Mart de México. de is a rare case where dividends have been decreasing at the same time as earnings per share have been improving. It's unusual to see, and could point to unstable conditions in the core business, or more rarely an intensified focus on reinvesting profits.

To Sum It Up

Should investors buy Wal-Mart de México. de for the upcoming dividend? Earnings per share growth has been modest, and it's interesting that Wal-Mart de México. de is paying out less than half of its earnings and more than half its cash flow to shareholders in the form of dividends. Overall, it's hard to get excited about Wal-Mart de México. de from a dividend perspective.

So while Wal-Mart de México. de looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. For example, we've found 1 warning sign for Wal-Mart de México. de that we recommend you consider before investing in the business.

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Disclaimer:This article represents the opinion of the author only. It does not represent the opinion of Webull, nor should it be viewed as an indication that Webull either agrees with or confirms the truthfulness or accuracy of the information. It should not be considered as investment advice from Webull or anyone else, nor should it be used as the basis of any investment decision.