LiveChat Software's (WSE:LVC) Upcoming Dividend Will Be Larger Than Last Year's

LiveChat Software S.A. (WSE:LVC) has announced that it will be increasing its dividend on the 3rd of January to zł1.14, which will be 28% higher than last year. This makes the dividend yield about the same as the industry average at 3.2%.

View our latest analysis for LiveChat Software

LiveChat Software Doesn't Earn Enough To Cover Its Payments

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. Before making this announcement, LiveChat Software's was paying out quite a large proportion of earnings and 88% of free cash flows. This indicates that the company is more focused on returning cash to shareholders than growing the business, but we don't think that there are necessarily signs that the dividend might be unsustainable.

The next 12 months is set to see EPS grow by 18.8%. However, if the dividend continues growing along recent trends, it could start putting pressure on the balance sheet with the payout ratio reaching 100% over the next year.

LiveChat Software Is Still Building Its Track Record

The dividend's track record has been pretty solid, but with only 7 years of history we want to see a few more years of history before making any solid conclusions. The first annual payment during the last 7 years was zł0.37 in 2014, and the most recent fiscal year payment was zł3.69. This works out to be a compound annual growth rate (CAGR) of approximately 39% 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.

LiveChat Software's Dividend Might Lack Growth

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 28% per annum. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why LiveChat Software is not retaining those earnings to reinvest in growth.

In Summary

Overall, this is probably not a great income stock, even though the dividend is being raised at the moment. While we generally think the level of distributions are a bit high, we wouldn't rule it out as becoming a good dividend payer in the future as its earnings are growing healthily. We would be a touch cautious of relying on this stock primarily for the dividend income.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. For example, we've picked out 1 warning sign for LiveChat Software that investors should know about before committing capital to this stock. We have also put together a list of global stocks with a solid dividend.

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.

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