Attention dividend hunters! MSCI Inc (NYSE:MSCI) will be distributing its dividend of US$0.58 per share on the 30 November 2018, and will start trading ex-dividend in 4 days time on the 15 November 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I take a deeper dive into MSCI’s latest financial data to analyse its dividend attributes.

Check out our latest analysis for MSCI

How I analyze a dividend stock

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

• Does it pay an annual yield higher than 75% of dividend payers?

• Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?

• Has it increased its dividend per share amount over the past?

• Is is able to pay the current rate of dividends from its earnings?

• Will the company be able to keep paying dividend based on the future earnings growth?

Does MSCI pass our checks?

The company currently pays out 37% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect MSCI’s payout to remain around the same level at 36% of its earnings, which leads to a dividend yield of 1.4%. Moreover, EPS should increase to $5.5.

When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.

Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. The reality is that it is too early to consider MSCI as a dividend investment. It has only been consistently paying dividends for 4 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

Compared to its peers, MSCI produces a yield of 1.5%, which is on the low-side for Capital Markets stocks.

Next Steps:

If you are building an income portfolio, then MSCI is a complicated choice since it has some positive aspects as well as negative ones. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three key factors you should look at:

1. Future Outlook: What are well-informed industry analysts predicting for MSCI’s future growth? Take a look at our free research report of analyst consensus for MSCI’s outlook.

2. Valuation: What is MSCI worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether MSCI is currently mispriced by the market.

3. Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.