Readers hoping to buy MSCI Inc. (NYSE:MSCI) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase MSCI's shares before the 11th of August to receive the dividend, which will be paid on the 31st of August.

The company's next dividend payment will be US$1.25 per share. Last year, in total, the company distributed US$5.00 to shareholders. Last year's total dividend payments show that MSCI has a trailing yield of 1.0% on the current share price of $496.18. If you buy this business for its dividend, you should have an idea of whether MSCI's dividend is reliable and sustainable. As a result, readers should always check whether MSCI has been able to grow its dividends, or if the dividend might be cut.

See our latest analysis for MSCI

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see MSCI paying out a modest 42% of its earnings.

When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. That's why it's comforting to see MSCI's earnings have been skyrocketing, up 30% per annum for the past five years.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past eight years, MSCI has increased its dividend at approximately 27% a year on average. Both per-share earnings and dividends have both been growing rapidly in recent times, which is great to see.

Final Takeaway

Has MSCI got what it takes to maintain its dividend payments? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the 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. Overall, MSCI looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.

On that note, you'll want to research what risks MSCI is facing. To help with this, we've discovered 1 warning sign for MSCI that you should be aware of before investing in their shares.

If you're in the market for strong dividend payers, we recommend checking our selection of top 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.