Is It Worth Considering LiveChat Software S.A. (WSE:LVC) 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 LiveChat Software S.A. (WSE:LVC) is about to trade ex-dividend in the next 3 days. This means that investors who purchase shares on or after the 30th of December will not receive the dividend, which will be paid on the 11th of January.

LiveChat Software's next dividend payment will be zł0.89 per share. Last year, in total, the company distributed zł2.48 to shareholders. Looking at the last 12 months of distributions, LiveChat Software has a trailing yield of approximately 2.4% on its current stock price of PLN102. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.

See our latest analysis for LiveChat Software

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. LiveChat Software paid out more than half (53%) 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 paid out 87% of its free cash flow as dividends, which is within usual limits but will limit the company's ability to lift the dividend if there's no growth.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

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. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see LiveChat Software's earnings have been skyrocketing, up 38% per annum for the past five years.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last seven years, LiveChat Software has lifted its dividend by approximately 31% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.

To Sum It Up

Should investors buy LiveChat Software for the upcoming dividend? It's good to see earnings are growing, since all of the best dividend stocks grow their earnings meaningfully over the long run. That's why we're glad to see LiveChat Software's earnings per share growing, although as we saw, the company is paying out more than half of its earnings and cashflow - 53% and 87% respectively. In summary, it's hard to get excited about LiveChat Software from a dividend perspective.

With that in mind, a critical part of thorough stock research is being aware of any risks that stock currently faces. For example, LiveChat Software has 2 warning signs (and 1 which is potentially serious) we think you should know about.

If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.

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This article by Simply Wall St is general in nature. 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.
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