Benzinga | Jan 6, 2021 09:57AM EST

Can MSC Industrial Direct Co Maintain Its Dividend Yield?

In today's dividend safety check, Benzinga Insights looks into MSC Industrial Direct Co (NYSE:MSM) to see if its 3.54% dividend yield is safe as the company is releasing its earnings on January 6, 2021 before the bell. To better understand this, we will be looking into the earnings-to-dividend payout ratio and whether the company's dividend has recently been cut.

MSC Industrial Direct Co's Payout Ratio

A dividend's affordability can be measured by its payout ratio, which is equal to dividends per share divided by earnings per share. Investors should not be too concerned about MSC Industrial Direct Co's relatively low payout ratio of 68.81%. When a payout ratio is low like this (i.e. below than 75%), it indicates that a company has the money needed to cover its dividend. A ratio closer to 100% could suggest that a company is struggling to pay its dividend.

Has MSC Industrial Direct Co Cut Its Dividend in the Recent Past?

Typically, it is difficult to predict future behavior based on past activities, but companies with recent histories of dividend cuts could cut them again. If a company does not have a history of consistent or rising dividends, it has less incentive to appease income investors than companies that do. MSC Industrial Direct Co's has not cut its dividend in the last few years, implying its management is reluctant to do so. While there is no guarantee of dividend safety, this is indicative of reliable dividend actions.

How Safe Is MSC Industrial Direct Co's Dividend Overall?

MSC Industrial Direct Co has failed none of our dividend safety tests. It has a low payout ratio but has no recent case(s) of dividend cuts. With all of this in mind, it is quite unlikely that MSC Industrial Direct Co will cut its dividend next quarter.

Looking for more help identifying reliable investments? Check out Benzinga's Breakout Opportunity Letter.