Important news for shareholders and potential investors in Morgan Stanley (NYSE:MS): The dividend payment of US$0.30 per share will be distributed to shareholders on 15 May 2019, and the stock will begin trading ex-dividend at an earlier date, 29 April 2019. What does this mean for current shareholders and potential investors? Below, I will explain how holding Morgan Stanley can impact your portfolio income stream, by analysing the stock's most recent financial data and dividend attributes.
5 checks you should use to assess 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 it increased its dividend per share amount over the past?
- Does earnings amply cover its dividend payments?
- Will it have the ability to keep paying its dividends going forward?
How well does Morgan Stanley fit our criteria?
Morgan Stanley has a trailing twelve-month payout ratio of 25%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect MS's payout to remain around the same level at 28% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 3.0%. In addition to this, EPS should increase to $5.04.
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. In the case of MS it has increased its DPS from $0.20 to $1.2 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. These are all positive signs of a great, reliable dividend stock.
Compared to its peers, Morgan Stanley produces a yield of 2.5%, which is high for Capital Markets stocks but still below the market's top dividend payers.
Considering the dividend attributes we analyzed above, Morgan Stanley 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. There are three essential factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for MS’s future growth? Take a look at our free research report of analyst consensus for MS’s outlook.
- Valuation: What is MS 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 MS 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.