Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Shares of MSA Safety Incorporated (NYSE:MSA) will begin trading ex-dividend in 4 days. To qualify for the dividend check of US$0.38 per share, investors must have owned the shares prior to 15 February 2019, which is the last day the company’s management will finalize their list of shareholders to which they will send dividend payments. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into MSA Safety’s latest financial data to analyse its dividend attributes.
5 questions to ask before buying a dividend stock
When researching a dividend stock, I always follow the following screening criteria:
- Is it paying an annual yield above 75% of dividend payers?
- Does it consistently pay out dividends without missing a payment of significantly cutting payout?
- Has it increased its dividend per share amount over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
Does MSA Safety pass our checks?
MSA Safety has a trailing twelve-month payout ratio of 84%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting lower payout ratio of 30% which, assuming the share price stays the same, leads to a dividend yield of around 1.5%. However, EPS should increase to $4.34, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. In the case of MSA it has increased its DPS from $0.96 to $1.52 in the past 10 years. It has also been paying out dividend consistently during this time, as you’d expect for a company increasing its dividend levels. These are all positive signs of a great, reliable dividend stock.
Compared to its peers, MSA Safety generates a yield of 1.5%, which is on the low-side for Commercial Services stocks.
Considering the dividend attributes we analyzed above, MSA Safety is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three relevant factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for MSA’s future growth? Take a look at our free research report of analyst consensus for MSA’s outlook.
- Valuation: What is MSA worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether MSA is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.