Slim Boosts Dividends, Buybacks With Mexico Bucking Global Trend
(Bloomberg) -- Companies around the world are pivoting away from dividends and share repurchases. Not so in Mexico, where billionaire Carlos Slim and other tycoons are dangling increased investor rewards.
Slim’s America Movil SAB is asking shareholders to approve a dividend increase of 8.6% to 17 billion pesos ($711 million) this year, and boosting its buyback program. Fomento Economico Mexicano SAB, parent of a convenience-store chain and a soft-drink bottler, approved a 7% increase in the total dividend payout while more than doubling buyback authorization to 17 billion pesos.
The extra goodies represent a sharp contrast with the corporate scene around the world, where companies have been tightening their purse strings as they rely on government aid to survive the Covid-19 pandemic. In Mexico, President Andres Manuel Lopez Obrador has vowed not to bail out companies. And with the economy plunging, investors such as Michael Reynal say they would like to see greater corporate caution.
“I would tend to prefer a more conservative approach,” said Reynal, who holds Mexican stocks in his portfolio at RS Investment Management in Des Moines, Iowa. “The key issue is lack of visibility on the recovery. We sense that the pandemic has a cycle, but we have little sense of timing or duration. Biggest issue then is difficulty in forecasting, even in the near future.”
In the U.S., Canada and Western Europe, businesses have scrapped more than $56 billion of dividends, according to data compiled by Bloomberg. Frowning on buybacks had united U.S. political leaders from President Donald Trump to Representative Alexandria Ocasio-Cortez, a New York Democrat, even before the government’s $2 trillion economic rescue plan placed limits on the practice.
Mexico’s bank and securities regulator, looking to shore up liquidity, recently urged financial institutions not to pay dividends or buybacks. But the recommendation didn’t apply to non-financial companies, many of which are controlled by family owners.
Out of the 35 companies that comprise Mexico’s benchmark index, eight have already maintained or boosted their dividends for the year and only two didn’t declare one. Of the rest, 74% are likely to declare an increase, according to Bloomberg estimates. Only one company, restaurant operator Alsea SAB, is expected to omit a dividend altogether.
In another major Latin American market, of the 19 Brazilian companies forecast to discuss dividends in the second quarter, eight are expected to cut or scrap dividends, including state-owned oil company Petrobras, which canceled scheduled dates to pay 1.7 billion reais in dividends ($322 million).
Some Mexican companies are also sticking with buybacks. Slim’s America Movil doubled its share-repurchasing fund to 6 billion pesos, although that includes an undisclosed amount left over from last year. The telecom giant declined to comment. Separately, Slim’s foundation donated $43 million to coronavirus relief efforts.
Fomento Economico Mexicano, or Femsa, declined to comment, as did Coca-Cola Femsa SAB, its soft-drink bottler. Coca-Cola Femsa boosted its buyback fund more than five fold to 5 billion pesos.
Some Mexican companies are showing more restraint. Cement maker Cemex SAB said it would suspend its share buyback program to preserve liquidity. Airport operators have been hard hit by the crisis as travelers stay home, and Grupo Aeroportuario del Pacifico SAB said it would postpone a dividend proposal as it works to control costs.
But another airport operator, Grupo Aeroportuario del Sureste SAB, will seek approval for $95 million in dividends and propose the maximum buyback amount at an April 23 meeting. The company didn’t respond to a request for comment.
Shareholders at Nemak SAB, which makes auto parts, is paring its dividend but still planning to pay out about $50 million after a shareholder vote in February. The board will closely review the dividend and make a recommendation to shareholders based on current market conditions, the company said Thursday.
“The company has redoubled its efforts to counter the effects of Covid-19 in the global auto industry through the optimization of costs, expenses and cash flow,” Nemak’s parent company, Alfa SAB, said in a statement. “We’re permanently monitoring market conditions and are ready to respond with new initiatives.”
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