LVMH Moët Hennessy - Louis Vuitton Société Européenne (EPA:MC) Could Be A Buy For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see LVMH Moët Hennessy - Louis Vuitton, Société Européenne (EPA:MC) is about to trade ex-dividend in the next four days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. 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. Therefore, if you purchase LVMH Moët Hennessy - Louis Vuitton Société Européenne's shares on or after the 23rd of April, you won't be eligible to receive the dividend, when it is paid on the 25th of April.

The company's next dividend payment will be €7.50 per share, and in the last 12 months, the company paid a total of €13.00 per share. Last year's total dividend payments show that LVMH Moët Hennessy - Louis Vuitton Société Européenne has a trailing yield of 1.6% on the current share price of €804.00. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.

See our latest analysis for LVMH Moët Hennessy - Louis Vuitton Société Européenne

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. That's why it's good to see LVMH Moët Hennessy - Louis Vuitton Société Européenne paying out a modest 43% of its earnings. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Over the last year it paid out 59% of its free cash flow as dividends, within the usual range for most companies.

It's positive to see that LVMH Moët Hennessy - Louis Vuitton Société Européenne'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.

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

Have Earnings And Dividends Been Growing?

Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. Fortunately for readers, LVMH Moët Hennessy - Louis Vuitton Société Européenne's earnings per share have been growing at 19% a year for the past five years. LVMH Moët Hennessy - Louis Vuitton Société Européenne is paying out a bit over half its earnings, which suggests the company is striking a balance between reinvesting in growth, and paying dividends. This is a reasonable combination that could hint at some further dividend increases in the future.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the last 10 years, LVMH Moët Hennessy - Louis Vuitton Société Européenne has lifted its dividend by approximately 16% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Should investors buy LVMH Moët Hennessy - Louis Vuitton Société Européenne for the upcoming dividend? From a dividend perspective, we're encouraged to see that earnings per share have been growing, the company is paying out less than half of its earnings, and a bit over half its free cash flow. It's a promising combination that should mark this company worthy of closer attention.

Curious what other investors think of LVMH Moët Hennessy - Louis Vuitton Société Européenne? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.