LiveChat Software's (WSE:LVC) Dividend Will Be Increased To PLN1.46

The board of LiveChat Software S.A. (WSE:LVC) has announced that it will be increasing its dividend by 28% on the 5th of January to PLN1.46, up from last year's comparable payment of PLN1.14. Based on this payment, the dividend yield for the company will be 3.8%, which is fairly typical for the industry.

See our latest analysis for LiveChat Software

LiveChat Software's Earnings Easily Cover The Distributions

We aren't too impressed by dividend yields unless they can be sustained over time. Prior to this announcement, LiveChat Software's dividend was only 65% of earnings, however it was paying out 114% of free cash flows. The company might be more focused on returning cash to shareholders, but paying out this much of its cash flow could expose the dividend to being cut in the future.

Looking forward, earnings per share is forecast to rise by 48.8% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 73%, which is in the range that makes us comfortable with the sustainability of the dividend.

LiveChat Software Doesn't Have A Long Payment History

The dividend's track record has been pretty solid, but with only 8 years of history we want to see a few more years of history before making any solid conclusions. The annual payment during the last 8 years was PLN0.37 in 2014, and the most recent fiscal year payment was PLN4.40. This means that it has been growing its distributions at 36% per annum over that time. The dividend has been growing rapidly, however with such a short payment history we can't know for sure if payment can continue to grow over the long term, so caution may be warranted.

The Dividend Looks Likely To Grow

The company's investors will be pleased to have been receiving dividend income for some time. LiveChat Software has seen EPS rising for the last five years, at 23% per annum. LiveChat Software is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.

Our Thoughts On LiveChat Software's Dividend

Overall, we always like to see the dividend being raised, but we don't think LiveChat Software will make a great income stock. While LiveChat Software is earning enough to cover the payments, the cash flows are lacking. This company is not in the top tier of income providing stocks.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 2 warning signs for LiveChat Software (of which 1 doesn't sit too well with us!) you should know about. Is LiveChat Software not quite the opportunity you were looking for? Why not check out 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.