MSC Industrial Direct (NYSE:MSM) Is Increasing Its Dividend To $0.79
The board of MSC Industrial Direct Co., Inc. (NYSE:MSM) has announced that it will be paying its dividend of $0.79 on the 29th of November, an increased payment from last year's comparable dividend. This makes the dividend yield 4.1%, which is above the industry average.
View our latest analysis for MSC Industrial Direct
MSC Industrial Direct's Earnings Easily Cover The Distributions
While it is great to have a strong dividend yield, we should also consider whether the payment is sustainable. The last payment was quite easily covered by earnings, but it made up 111% of cash flows. This signals that the company is more focused on returning cash flow to shareholders, but it could mean that the dividend is exposed to cuts in the future.
The next year is set to see EPS grow by 34.3%. If the dividend continues along recent trends, we estimate the payout ratio will be 47%, which is in the range that makes us comfortable with the sustainability of the dividend.
MSC Industrial Direct Has A Solid Track Record
Even over a long history of paying dividends, the company's distributions have been remarkably stable. The annual payment during the last 10 years was $1.00 in 2012, and the most recent fiscal year payment was $3.16. This works out to be a compound annual growth rate (CAGR) of approximately 12% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.
The Dividend Has Growth Potential
Investors could be attracted to the stock based on the quality of its payment history. MSC Industrial Direct has impressed us by growing EPS at 5.7% per year over the past five years. The lack of cash flows does make us a bit cautious though, especially when it comes to the future of the dividend.
Our Thoughts On MSC Industrial Direct's Dividend
Overall, we always like to see the dividend being raised, but we don't think MSC Industrial Direct will make a great income stock. While the low payout ratio is redeeming feature, this is offset by the minimal cash to cover the payments. 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. Taking the debate a bit further, we've identified 2 warning signs for MSC Industrial Direct that investors need to be conscious of moving forward. Is MSC Industrial Direct not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
