This FAST Graphs analyze out loud video will cover a mid-cap dividend growth stock that many may not be familiar with. However, I believe this particular dividend growth stock offers an intriguing opportunity of high current yield, above-average growth yield and enticing capital appreciation potential based on its low valuation.
MSC Industrial Direct Co. (MSM)
Company description:
MSC Industrial Supply is one of the nation’s largest direct marketers and distributors of a broad range of metalworking and maintenance, repair and operations (MRO) products to customers throughout North America.
MSC operates a sophisticated network of twelve customer fulfillment centers (eight customer fulfillment centers are located within the United States, three are located in Canada and one is located in the United Kingdom) and 100 branch offices (99 in the United States and one in the U.K.). MSC’s primary customer fulfillment centers are located in or near Harrisburg, Pennsylvania; Atlanta, Georgia; Elkhart, Indiana; Reno, Nevada; and Columbus, Ohio in the United States. In addition, MSC operates 7 smaller customer fulfillment centers in or near Hanover Park, Illinois; Dallas, Texas; Shelbyville, Kentucky (repackaging and replenishment center); Wednesbury, England; Edmonton, Canada; Beamsville, Canada; and Moncton, Canada.
Investment Thesis
MSC Industrial Supply recently missed 3rd quarter earnings estimate by $0.04 as the company earned $1.45 versus $1.49 estimated. Additionally, the revenues came in at $866.55 million which missed by a mere $14.90 M. This is the second quarter in a row that the company has slightly missed estimates. During the 2nd quarter the company missed earnings by only $0.01 and revenues by only $3.23 M. However, it should be noted that this is a semi-cyclical industrial company with a lot of moving parts, and as such, rather difficult to forecast accurately.
Nevertheless, in spite of this moderate cyclicality, the company does offer some intriguing fundamental attributes as a dividend growth stock. Their long-term dividend growth rate has been exceptional primarily resulting from their ability to generate strong and consistent free cash flow over time. Additionally, although it has been somewhat lumpy, the company has grown earnings in excess of 10% and EBITDA in excess of 9% since fiscal year 2000 which ends in August.
Consequently, I believe the company is currently available at a discount to its intrinsic value and therefore, an above-average dividend yield that is expected to continue growing. To be clear, I am most attracted to the company’s historic dividend growth and its potential future dividend growth. Therefore, I believe it’s an intriguing opportunity for retired investors looking for above-average current income and inflation-fighting dividend growth.
MSC Industrial Direct Co. (MSM): FAST Graph Analyze Out Loud Video
The following analyze out loud video will detail my attraction to this mid-cap dividend growth stock. Additionally, I will also be pointing out some of the potential negatives and issues that investing in this kind of smaller volatile dividend growth stock often presents.