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. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase LVMH Moët Hennessy - Louis Vuitton Société Européenne's shares on or after the 24th of April will not receive the dividend, which will be paid on the 28th 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. Based on the last year's worth of payments, LVMH Moët Hennessy - Louis Vuitton Société Européenne stock has a trailing yield of around 2.7% on the current share price of €485.60. 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 check whether the dividend payments are covered, and if earnings are growing.

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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. LVMH Moët Hennessy - Louis Vuitton Société Européenne paid out more than half (52%) of its earnings last year, which is a regular payout ratio for most companies. 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. It distributed 49% of its free cash flow as dividends, a comfortable payout level 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.

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

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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we're glad to see LVMH Moët Hennessy - Louis Vuitton Société Européenne's earnings per share have risen 12% per annum over the last 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.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. LVMH Moët Hennessy - Louis Vuitton Société Européenne has delivered an average of 15% per year annual increase in its dividend, based on the past 10 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

The Bottom Line

Has LVMH Moët Hennessy - Louis Vuitton Société Européenne got what it takes to maintain its dividend payments? We like LVMH Moët Hennessy - Louis Vuitton Société Européenne's growing earnings per share and the fact that - while its payout ratio is around average - it paid out a lower percentage of its cash flow. LVMH Moët Hennessy - Louis Vuitton Société Européenne looks solid on this analysis overall, and we'd definitely consider investigating it more closely.

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. In terms of investment risks, we've identified 1 warning sign with LVMH Moët Hennessy - Louis Vuitton Société Européenne and understanding them should be part of your investment process.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.