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

Readers hoping to buy LVMH Moët Hennessy - Louis Vuitton, Société Européenne (EPA:MC) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. 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 important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase LVMH Moët Hennessy - Louis Vuitton Société Européenne's shares before the 2nd of December to receive the dividend, which will be paid on the 4th of December.

The company's upcoming dividend is €5.50 a share, following on from the last 12 months, when the company distributed a total of €13.00 per share to shareholders. Looking at the last 12 months of distributions, LVMH Moët Hennessy - Louis Vuitton Société Européenne has a trailing yield of approximately 2.2% on its current stock price of €596.00. 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 LVMH Moët Hennessy - Louis Vuitton Société Européenne can afford its dividend, and if the dividend could grow.

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

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. LVMH Moët Hennessy - Louis Vuitton Société Européenne paid out a comfortable 47% of its profit last year. A useful secondary check can be to evaluate whether LVMH Moët Hennessy - Louis Vuitton Société Européenne generated enough free cash flow to afford its dividend. Over the last year it paid out 54% 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?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, LVMH Moët Hennessy - Louis Vuitton Société Européenne's earnings per share have been growing at 17% a year for the past five years. LVMH Moët Hennessy - Louis Vuitton Société Européenne has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. Given the quick rate of earnings per share growth and current level of payout, there may be a chance of 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. LVMH Moët Hennessy - Louis Vuitton Société Européenne has delivered 15% dividend growth per year on average over the past 10 years. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Is LVMH Moët Hennessy - Louis Vuitton Société Européenne worth buying for its dividend? Earnings per share have grown at a nice rate in recent times and over the last year, LVMH Moët Hennessy - Louis Vuitton Société Européenne paid out less than half its earnings and a bit over half its free cash flow. There's a lot to like about LVMH Moët Hennessy - Louis Vuitton Société Européenne, and we would prioritise taking a closer look at it.

So while LVMH Moët Hennessy - Louis Vuitton Société Européenne looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. Every company has risks, and we've spotted 1 warning sign for LVMH Moët Hennessy - Louis Vuitton Société Européenne you should know about.

Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers.

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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.