LiveChat Software's (WSE:LVC) Shareholders Will Receive A Bigger Dividend Than Last Year

LiveChat Software S.A. (WSE:LVC) has announced that it will be increasing its dividend from last year's comparable payment on the 1st of September to PLN2.12. The payment will take the dividend yield to 3.7%, which is in line with the average for the industry.

View our latest analysis for LiveChat Software

LiveChat Software's Dividend Is Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. The last payment was quite easily covered by earnings, but it made up 96% of 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 54.2% over the next year. Assuming the dividend continues along recent trends, we think the payout ratio could be 75% by next year, which is in a pretty sustainable range.

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. Since 2014, the dividend has gone from PLN0.37 total annually to PLN3.69. This works out to be a compound annual growth rate (CAGR) of approximately 33% a year 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

Investors could be attracted to the stock based on the quality of its payment history. LiveChat Software has seen EPS rising for the last five years, at 23% per annum. The company doesn't have any problems growing, despite returning a lot of capital to shareholders, which is a very nice combination for a dividend stock to have.

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. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've identified 2 warning signs for LiveChat Software (1 is a bit unpleasant!) that you should be aware of before investing. Looking for more high-yielding dividend ideas? Try our collection of 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.