MSC Industrial Direct Co Inc (NYSE:MSM) Is An Attractive Dividend Stock, Here’s Why
Over the past 10 years MSC Industrial Direct Co Inc (NYSE:MSM) has been paying dividends to shareholders. The company currently pays out a dividend yield of 2.8% to shareholders, making it a relatively attractive dividend stock. Should it have a place in your portfolio? Let’s take a look at MSC Industrial Direct in more detail.
See our latest analysis for MSC Industrial Direct
How I analyze a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
Is its annual yield among the top 25% of dividend-paying companies?
Does it consistently pay out dividends without missing a payment of significantly cutting payout?
Has dividend per share risen in the past couple of years?
Can it afford 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?
How well does MSC Industrial Direct fit our criteria?
The current trailing twelve-month payout ratio for the stock is 37%, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 39%, leading to a dividend yield of around 3.0%. In addition to this, EPS should increase to $5.92.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. MSM has increased its DPS from $0.80 to $2.32 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.
In terms of its peers, MSC Industrial Direct has a yield of 2.8%, which is high for Trade Distributors stocks but still below the market’s top dividend payers.
Next Steps:
Considering the dividend attributes we analyzed above, MSC Industrial Direct is definitely worth keeping an eye on for someone looking to build a dedicated income portfolio. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three relevant aspects you should further examine:
Future Outlook: What are well-informed industry analysts predicting for MSM’s future growth? Take a look at our free research report of analyst consensus for MSM’s outlook.
Valuation: What is MSM 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 MSM 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 editorial-team@simplywallst.com.
