Regular readers will know that we love our dividends at Simply Wall St, which is why it’s exciting to see MSA Safety Incorporated (NYSE:MSA) is about to trade ex-dividend in the next 3 days. This means that investors who purchase shares on or after the 11th of February will not receive the dividend, which will be paid on the 10th of March.
MSA Safety’s next dividend payment will be US$0.42 per share, and in the last 12 months, the company paid a total of US$1.68 per share. Calculating the last year’s worth of payments shows that MSA Safety has a trailing yield of 1.2% on the current share price of $140.71. If you buy this business for its dividend, you should have an idea of whether MSA Safety’s dividend is reliable and sustainable. So we need to investigate whether MSA Safety can afford its dividend, and if the dividend could grow.
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. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 49% of its free cash flow in the past year.
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 decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. With that in mind, we’re encouraged by the steady growth at MSA Safety, with earnings per share up 8.0% on average over the last five years. Management have been reinvested more than half of the company’s earnings within the business, and the company has been able to grow earnings with this retained capital. We think this is generally an attractive combination, as dividends can grow through a combination of earnings growth and or a higher payout ratio over time.
Many investors will assess a company’s dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, ten years ago, MSA Safety has lifted its dividend by approximately 5.8% a year on average. It’s encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
Is MSA Safety an attractive dividend stock, or better left on the shelf? Earnings per share have been growing moderately, and MSA Safety is paying out less than half its earnings and cash flow as dividends, which is an attractive combination as it suggests the company is investing in growth. It might be nice to see earnings growing faster, but MSA Safety is being conservative with its dividend payouts and could still perform reasonably over the long run. MSA Safety looks solid on this analysis overall, and we’d definitely consider investigating it more closely.
Wondering what the future holds for MSA Safety? See what the four analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you’re in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.
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