Dividend Kings In Focus: MSA Safety

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 record of all 44 Dividend Kings. You possibly can obtain the complete record, together with necessary monetary metrics comparable to dividend yields and price-to-earnings ratios, by clicking on the hyperlink under:

Annually, we individually evaluation all of the Dividend Kings. The subsequent within the collection is MSA Security (MSA).

MSA Security has elevated its dividend for over 50 consecutive years, together with a latest 4% increase. This text will analyze the corporate in higher 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 a wide range of industrial markets, together with oil & fuel, hearth service, development, 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 yr 2021 outcomes for the interval ending December thirty first, 2021. For the quarter income got here in at $410.3 million, a 5.7% improve in comparison with This fall 2020. Gross sales within the Americas section had been up 3.4%, whereas gross sales within the Worldwide section 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 yr MSA generated $1.4 billion or income, up 4% in comparison with 2020, pushed by a 9% improve 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 yr throughout the 2008 by means of 2019 interval. Ends in 2020 fell reasonably, which isn’t sudden given the coronavirus pandemic. Nonetheless, earnings bounced again in 2021 and we anticipate additional features for 2022.

The corporate views the present setting as wholesome, which bodes nicely 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 growth into new product classes comparable to protecting clothes for firefighters. Improvements such because the thermal imaging digital camera within the self-contained respiratory equipment and the corporate’s V-Collection line of fall safety have helped as nicely.

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

Furthermore, a lot of MSA’s merchandise proceed to be in demand within the present setting. 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’t match, with roughly a 3rd of annual gross sales from outdoors the Americas, and it could possibly spend money on development initiatives to retain its trade management.

To make sure, there may be some cyclicality inherent within the enterprise – security is at all times necessary, however budgets turn out to be squeezed in lesser instances. That stated, buyers needs to be inspired that the dividend saved growing throughout recessions.

Earnings-per-share efficiency throughout the Nice Recession is under:

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

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

Valuation & Anticipated Returns

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

Nonetheless, with a present P/E ratio of 25.4 instances anticipated earnings, this means 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.

Apart from adjustments within the price-to-earnings a number of, future returns shall be pushed by earnings development and dividends.

We anticipate 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 yr by means of 2027. Consequently, we’ve got a maintain advice on MSA inventory, although the corporate’s capacity to boost dividends by means of a number of recessions is spectacular.

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

Closing Ideas

MSA Security is a robust enterprise with aggressive benefits. Furthermore, the corporate additionally has an inexpensive development profile. Whole return potential is available in at 5.5% per yr, 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 ranking.

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

Should you’re searching for shares with distinctive dividend traits, contemplate the next Certain Dividend databases: