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Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that MSA Safety Incorporated (NYSE:MSA) is about to go ex-dividend in just four days. This means that investors who purchase shares on or after the 14th of August will not receive the dividend, which will be paid on the 10th of September.
MSA Safety's next dividend payment will be US$0.43 per share. Last year, in total, the company distributed US$1.72 to shareholders. Looking at the last 12 months of distributions, MSA Safety has a trailing yield of approximately 1.4% on its current stock price of $119.4. 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.
Check out 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. Fortunately MSA Safety's payout ratio is modest, at just 43% of profit. A useful secondary check can be to evaluate whether MSA Safety generated enough free cash flow to afford its dividend. It distributed 39% of its free cash flow as dividends, a comfortable payout level for most companies.
It's positive to see that MSA Safety's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
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. For this reason, we're glad to see MSA Safety's earnings per share have risen 11% per annum over the last five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. Fast-growing businesses that are reinvesting heavily are enticing from a dividend perspective, especially since they can often increase the payout ratio later.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. MSA Safety has delivered 6.0% dividend growth per year on average over the past 10 years. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.