MSCI (NYSE:MSCI) Could Be A Buy For Its Upcoming Dividend

MSCI Inc. (NYSE:MSCI) stock is about to trade ex-dividend in 2 days. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. This means that investors who purchase MSCI's shares on or after the 14th of February will not receive the dividend, which will be paid on the 28th of February.

The company's upcoming dividend is US$1.80 a share, following on from the last 12 months, when the company distributed a total of US$7.20 per share to shareholders. Calculating the last year's worth of payments shows that MSCI has a trailing yield of 1.2% on the current share price of US$583.48. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for MSCI

Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. MSCI paid out a comfortable 45% of its profit last year.

Generally speaking, the lower a company's payout ratios, the more resilient its dividend usually is.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Fortunately for readers, MSCI's earnings per share have been growing at 16% a year for the past five years.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. MSCI has delivered an average of 26% per year annual increase in its dividend, based on the past 10 years of dividend payments. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

To Sum It Up

Is MSCI worth buying for its dividend? Companies like MSCI that are growing rapidly and paying out a low fraction of earnings, are usually reinvesting heavily in their business. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. We think this is a pretty attractive combination, and would be interested in investigating MSCI more closely.

On that note, you'll want to research what risks MSCI is facing. Our analysis shows 1 warning sign for MSCI and you should be aware of it before buying any shares.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.