Yahoo Finance MSA Safety (NYSE:MSA) Could Be A Buy For Its Upcoming Dividend
MSA Safety Incorporated (NYSE:MSA) stock is about to trade ex-dividend in 4 days. If you purchase the stock on or after the 18th of February, you won't be eligible to receive this dividend, when it is paid on the 10th of March.
MSA Safety's next dividend payment will be US$0.43 per share, and in the last 12 months, the company paid a total of US$1.72 per share. Based on the last year's worth of payments, MSA Safety has a trailing yield of 1.0% on the current stock price of $171.51. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! As a result, readers should always check whether MSA Safety has been able to grow its dividends, or if the dividend might be cut.
See our latest analysis for MSA Safety
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. MSA Safety paid out a comfortable 48% of its profit last year. A useful secondary check can be to evaluate whether MSA Safety generated enough free cash flow to afford its dividend. It distributed 47% of its free cash flow as dividends, a comfortable payout level for most companies.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings fall far enough, the company could be forced to cut its dividend. This is why it's a relief to see MSA Safety earnings per share are up 9.0% per annum over the last five years. The company is retaining more than half of its earnings within the business, and it has been growing earnings at a decent rate. Organisations that reinvest heavily in themselves typically get stronger over time, which can bring attractive benefits such as stronger earnings and dividends.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. MSA Safety has delivered 5.6% dividend growth per year on average over the past 10 years. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
To Sum It Up
Is MSA Safety worth buying for its dividend? Earnings per share growth has been growing somewhat, and MSA Safety is paying out less than half its earnings and cash flow as dividends. This is interesting for a few reasons, as it suggests management may be reinvesting heavily in the business, but it also provides room to increase the dividend in time. We would prefer to see earnings growing faster, but the best dividend stocks over the long term typically combine significant earnings per share growth with a low payout ratio, and MSA Safety is halfway there. Overall we think this is an attractive combination and worthy of further research.
In light of that, while MSA Safety has an appealing dividend, it's worth knowing the risks involved with this stock. In terms of investment risks, we've identified 3 warning signs with MSA Safety and understanding them should be part of your investment process.
A common investment mistake is buying the first interesting stock you see. Here you can find a list of promising dividend stocks with a greater than 2% yield and an upcoming dividend.
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. 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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