Dividend Kings In Focus: MSA Security

Printed on Might 4th, 2022 by Bob Ciura

The Dividend Kings are a gaggle of simply 44 shares which have elevated their dividends for a minimum of 50 years in a row. We imagine the Dividend Kings are among the many highest-quality dividend development shares to purchase and maintain for the long run.

With this in thoughts, we created a full checklist of all 44 Dividend Kings. You’ll be able to obtain the complete checklist, together with necessary monetary metrics akin to dividend yields and price-to-earnings ratios, by clicking on the hyperlink under:

Every year, we individually evaluation all of the Dividend Kings. The following within the sequence is MSA Security (MSA).

MSA Security has elevated its dividend for over 50 consecutive years, together with a current 4% increase. This text will analyze the corporate in better element.

Enterprise Overview

MSA Security Included, previously Mine Security Home equipment, was established in 1914. In the present day, it develops and manufactures security merchandise. Clients come from quite a lot of industrial markets, together with oil & fuel, hearth service, building, mining, and the navy.

Supply: Investor Presentation

MSA Security’s main merchandise embrace fuel and flame detection, air respirators, head safety, fall safety, air purifying respirators, and eye safety gear.

On July 1st, 2021, MSA acquired Bacharach, Inc., a pacesetter in fuel detection applied sciences, for $337 million.

On February seventeenth, 2022, MSA launched This fall and full 12 months 2021 outcomes for the interval ending December thirty first, 2021. For the quarter income got here in at $410.3 million, a 5.7% enhance in comparison with This fall 2020. Gross sales within the Americas phase had been up 3.4%, whereas gross sales within the Worldwide phase elevated 9.5%. Adjusted earnings equaled $66 million or $1.67 per share in comparison with $52 million or $1.33 per share in This fall 2022.

For the 12 months MSA generated $1.4 billion or income, up 4% in comparison with 2020, pushed by a 9% enhance in core product income. Adjusted earnings equaled $185 million or $4.68 per share in comparison with $181 million or $4.60 per share.

Development Prospects

MSA has put collectively a stable development document previously decade, rising by a mean charge of 8.5% per 12 months in the course of the 2008 by means of 2019 interval. Ends in 2020 fell reasonably, which isn’t sudden given the coronavirus pandemic. Nevertheless, earnings bounced again in 2021 and we anticipate additional beneficial properties for 2022.

The corporate views the present surroundings as wholesome, which bodes effectively for its future development.

Supply: Investor Presentation

MSA’s acquisition of Globe Manufacturing in 2017 boosted the corporate’s income development profile and supplied the corporate with an enlargement into new product classes akin to protecting clothes for firefighters. Improvements such because the thermal imaging digital camera within the self-contained respiration equipment and the corporate’s V-Collection line of fall safety have helped as effectively.

As well as, the Sierra Monitor acquisition, Bristol Uniforms acquisition, Bacharach acquisition and a powerful backlog cement the concept of the potential for continued development. Outcomes had been down in 2020, however nonetheless resilient, falling lower than -7%.

Furthermore, lots of MSA’s merchandise proceed to be in demand within the present surroundings. Over the intermediate time period we’re assuming 6% annual development.

Aggressive Benefits & Recession Efficiency

MSA Security has a number of aggressive benefits that gasoline its development because the chief throughout the protection and safety merchandise trade. It has a world attain that rivals can not match, with roughly a 3rd of annual gross sales from exterior the Americas, and it may possibly spend money on development initiatives to retain its trade management.

To make certain, there may be some cyclicality inherent within the enterprise – security is all the time necessary, however budgets change into squeezed in lesser occasions. That stated, traders needs to be inspired that the dividend stored rising throughout recessions.

Earnings-per-share efficiency in the course of the Nice Recession is under:

• 2007 earnings-per-share of $1.80
• 2008 earnings-per-share of $1.96 (8.9% enhance)
• 2009 earnings-per-share of $1.21 (38% decline)
• 2010 earnings-per-share of $1.05 (13% enhance)

That stated, the corporate remained extremely worthwhile in the course of the Nice Recession. This allowed it to proceed rising its dividend annually in the course of the recession, even when earnings declined. And, because of its robust model portfolio, the corporate recovered rapidly after 2010.

Valuation & Anticipated Returns

Utilizing the present share value of ~$127 and anticipated earnings-per-share of $5.00 for the 12 months, MSA inventory trades for a price-to-earnings ratio of 25.4. Over the previous 10 years shares of MSA have traded arms with a mean P/E ratio of about 23 occasions adjusted earnings. We’re utilizing this a number of as a beginning place for a “honest” valuation.

Nevertheless, with a present P/E ratio of 25.4 occasions anticipated earnings, this suggests the potential for a valuation headwind over the intermediate time period. Returning to our goal price-to-earnings ratio by 2027 would scale back annual returns by 2.0% over this time period.

Except for adjustments within the price-to-earnings a number of, future returns might be pushed by earnings development and dividends.

We count on 6% annual earnings development over the subsequent 5 years. As well as, MSA inventory has a present dividend yield of 1.5%.

Whole returns may encompass the next:

• 6.0% earnings development
• -2.0% a number of reversion
• 1.5% dividend yield

MSA is predicted to return 5.5% per 12 months by means of 2027. In consequence, we’ve a maintain advice on MSA inventory, although the corporate’s means to boost dividends by means of a number of recessions is spectacular.

The corporate has over 50 consecutive years of dividend development after rising its dividend by 4% in Might 2022.

Ultimate Ideas

MSA Security is a powerful enterprise with aggressive benefits. Furthermore, the corporate additionally has an inexpensive development profile. Whole return potential is available in at 5.5% per 12 months, pushed by 6% development and a 1.5% dividend yield, offset by the potential for a valuation headwind. Due to this fact, shares earn a maintain score.

Moreover, the next Positive Dividend databases comprise essentially the most dependable dividend growers in our funding universe:

In case you’re on the lookout for shares with distinctive dividend traits, contemplate the next Positive Dividend databases: