Is It Smart To Buy MSCI Inc. (NYSE:MSCI) Before It Goes Ex-Dividend?
It looks like MSCI Inc. (NYSE:MSCI) is about to go ex-dividend in the next 4 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. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. This means that investors who purchase MSCI's shares on or after the 14th of August will not receive the dividend, which will be paid on the 28th of August.
The company's upcoming dividend is US$2.05 a share, following on from the last 12 months, when the company distributed a total of US$8.20 per share to shareholders. Calculating the last year's worth of payments shows that MSCI has a trailing yield of 1.5% on the current share price of US$563.17. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. MSCI paid out a comfortable 42% of its profit last year.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
See our latest analysis for MSCI
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. That's why it's comforting to see MSCI's earnings have been skyrocketing, up 21% per annum 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 25% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
Final Takeaway
Has MSCI got what it takes to maintain its dividend payments? 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. In summary, MSCI appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
While it's tempting to invest in MSCI for the dividends alone, you should always be mindful of the risks involved. Every company has risks, and we've spotted 1 warning sign for MSCI you should know about.
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.