MSCI Inc.'s (NYSE:MSCI) dividend will be increasing from last year's payment of the same period to $1.38 on 28th of February. Despite this raise, the dividend yield of 1.0% is only a modest boost to shareholder returns.
MSCI's Earnings Easily Cover The Distributions
It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Based on the last payment, MSCI was quite comfortably earning enough to cover the dividend. This means that a large portion of its earnings are being retained to grow the business.
Looking forward, earnings per share is forecast to rise by 54.5% over the next year. If the dividend continues along recent trends, we estimate the payout ratio will be 36%, which is in the range that makes us comfortable with the sustainability of the dividend.
MSCI Doesn't Have A Long Payment History
MSCI's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. Since 2015, the dividend has gone from $0.72 total annually to $5.52. This means that it has been growing its distributions at 29% per annum over that time. We're not overly excited about the relatively short history of dividend payments, however the dividend is growing at a nice rate and we might take a closer look.
The Dividend Looks Likely To Grow
Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. We are encouraged to see that MSCI has grown earnings per share at 26% per year over the past five years. MSCI is clearly able to grow rapidly while still returning cash to shareholders, positioning it to become a strong dividend payer in the future.
We Really Like MSCI's Dividend
Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. As an example, we've identified 2 warning signs for MSCI that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated 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.
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