In a Volatile Market, This Dividend Growth Stock Is Worth Every Penny of $1,000

Whether they realize it or not, many investors have home-country bias, meaning they're inclined to favor shares of companies in their home country over foreign stocks. So it's not a stretch to say that market participants located in the U.S. are often heavily allocated to American stocks.

Some sectors more than others emphasize home-country bias. Many tech investors aren't afraid to cozy up to U.S.-listed foreign companies such as ASML or Taiwan Semiconductor Manufacturing. But with so many of the largest consumer staples companies, such as Coca-Cola (NYSE: KO), being American corporations, market participants often go with the red, white, and blue in this sector.

There's nothing wrong with being patriotic. But dividend growth investors can be rewarded by keeping an open geographic mind. Coca-Cola is a good example of that, as highlighted by Fomento Economico Mexicano (NYSE: FMX).

This Mexico-based company could be a desirable name for dividend investors. Image source: Getty Images.

Why Femsa is fabulous for dividend investors

Widely referred to as Femsa, Fomento Economico Mexicano owns the majority of the voting stock in Coca-Cola FEMSA (NYSE: KOF), which is the world's largest franchise bottler of Coca-Cola products. So, Femsa is very much a beverage stock, though there are chapters in its book.

Beverage stocks and dependable dividend growth often go hand in hand. Coca-Cola and PepsiCo have raised their dividends annually for 64 and 54 years, respectively. Undoubtedly, those are impressive streaks, but Femsa is a compelling dividend growth name in its own right. Over the past decade, the company's payout has tripled, cementing its status as a credible dividend stock.

The shares yield 6.72%, which is on the high side even for the consumer-staples sector. While that eye-catching yield may give astute investors pause about this stock, perhaps stoking concerns that it's a yield trap, Femsa's balance sheet is solid. The actual payout ratio varies widely depending time frame. The current high percentage ratio is due to fluctuating earnings and a recent special dividend. The more conservative, sustainable future payout ratio based on projected earnings this year puts it at around 43%.

Based on current exchange rates, the company had $7.38 billion in cash and short-term investments at the end of 2025, enough funds to handle any short-term issues. The balance sheet and, thus, shareholder rewards could also be further supported by a restructuring effort expected to generate $576.6 million in savings. That plan could bear fruit as soon as this year, with tangible benefits expected in 2027.

Eyes on Oxxo

Femsa's stake in the Latin American Coca-Cola bottler adds familiarity for U.S. investors, and there's no denying that the business accounts for a significant portion of the parent company's sales. However, dividend growth investors eyeing this stock should also consider the corporation's retail footprint, including the Oxxo chain.

Oxxo stores are small retail convenience store-type locations that are highly popular in Mexico. With renewed emphasis on strategy and consumer affordability, Oxxo stores in Mexico performed better than expected last year. Femsa is targeting significant long-term expansion of the chain in Brazil and Mexico, the two largest economies in Latin America.

Not only are Oxxo customers devoted, but 60% hail from the desirable 15-35 age range, enabling Femsa to cultivate long-lasting relationships with consumers while providing value to suppliers that want to get new products in front of shoppers. In economic-speak, those are intangible assets, but they support the case for Femsa as a long-term consideration for dividend investors.

Todd Shriber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Fomento Economico Mexicano. The Motley Fool has a disclosure policy.