Last update on 2024-06-27

Morgan Stanley (MS) - Dividend Analysis (Final Score: 5/8)

Analyze Morgan Stanley (MS) dividend performance & stability. Scored 5/8 using 8-criteria system over 20 years. Ideal for income-focused investors.

Short Analysis - Dividend Score: 5

We're running Morgan Stanley (MS) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price. It is an important metric for income-focused investors seeking stable and high-dividend-paying investments.

Morgan Stanley's (MS) current dividend yield of 3.4853% is significantly higher than the industry average of 2.03%. Over the last 20 years, MS's dividend yield has shown considerable fluctuations, peaking at 28.8646% in 2007 and dropping to a low of 0.6378% in 2013. In more recent years, the dividend yield has stabilized and even increased from 2.1394% in 2021 to 3.4853% in 2023. This trend indicates that MS is increasingly focused on returning value to its shareholders, making it an attractive option for income-focused investors. The comparison to the industry average further underscores MS's strong position in providing higher returns through dividends. Such a high yield, if consistent, can be seen as a positive indicator of the company's income-generating ability, although investors should also be wary of the potential risks linked to high-yield stocks.

Average annual Growth Rate higher than 5% in the last 20 years?

Dividend Growth Rate measures the annualized percentage rate of growth of a company's dividend payouts. This criterion assesses if Morgan Stanley has consistently increased its dividends by at least 5% annually over 20 years.

Interpreting the historical dividend per share ratios for Morgan Stanley, the figures indicate a highly volatile trend. These values show substantial fluctuations, including both significant increases (e.g., 2007's 1319.4444%) and notable decreases (e.g., 2008's -92.955%). This volatility suggests a lack of consistent year-on-year growth, undermining the potential to confidently state that the dividend growth rate exceeds 5% annually on average. The inconsistency would rightly be a concern for income-focused investors seeking reliable and steadily growing dividend payouts. Overall, Morgan Stanley's dividend growth trend appears to be irregular and thus, falls short of the ideal growth rate target.

Average annual Payout Ratio lower than 65% in the last 20 years?

The average payout ratio represents the proportion of earnings a company pays to shareholders in the form of dividends. A lower payout ratio often indicates that the company retains more earnings to reinvest in its business, which can be vital for growth.

Over the last 20 years, Morgan Stanley's (MS) payout ratio has fluctuated significantly, with an average of 83.997%. This clearly exceeds the 65% threshold. For instance, during the financial crisis of 2008, the payout ratio dramatically surged to 503.63% and in 2012, it also spiked to 692.52%. More recent years like 2020 and 2022 show comparatively lower yet fluctuating figures of around 82.3663% and 45.2301% respectively. This mixed trend can be seen as a concern as it indicates periods where the company had to distribute a high proportion of its earnings, potentially signaling financial strain during those years. High payout ratios might hinder the company's ability to reinvest its earnings for growth, making this trend largely unfavorable in this criterion.

Dividends Well Covered by Earnings?

Coverage ratio is essential as it indicates if the company can comfortably pay out dividends without stressing its earnings.

Analyzing Morgan Stanley’s EPS and DPS from 2003 to 2023, the key metric here is the ‘Dividends per Share Covered by Earnings per Share.’ Ideally, a ratio above 1 means earnings cover dividends well. For most of the observed period, Morgan Stanley's coverage ratio remains below 1. Specifically, years like 2004, 2005, and 2019 saw ratios of 0.246, 0.236, and 0.823 respectively, indicating dividends barely covered. However, anomalies like 2007 (ratio above 5) suggest extraordinary financial occurrences influencing payouts versus typical earnings, further evidenced in 2020 with a ratio of 0.452. Consistently low ratios may suggest caution for prospective dividend investors. Recent trends (2023's ratio of 0.582) show modest improvement, yet it's prudent to monitor future earnings against dividend obligations.

Dividends Well Covered by Cash Flow?

The evaluation of whether dividends are well covered by free cash flow is fundamentally important as it provides insights into the sustainability and stability of dividend payments. Strong and positive free cash flow coverage suggests a capacity to maintain or grow dividend payments, enhancing investor confidence.

From the provided data (2003-2023), we observe drastic fluctuations in Morgan Stanley's free cash flow (FCF) relative to its dividend payouts. The ratio of FCF to dividends starts at 0.567 in 2003, suggesting that FCF could well cover dividends then. However, there are numerous years where the ratio is negative, indicating that FCF was insufficient for dividend coverage, notably in 2008, 2009, and multiple subsequent years. Positive ratios appear in other periods, the peak being 6.503 in 2014, but overall consistency in covering dividends through FCF remains elusive. This inconsistency signals potential troubles in maintaining dividend payments purely from operations, which could be alarming for dividend-centric investors. Such trends reflect volatility and occasional insufficiency in earnings generation to comfortably sustain dividends, a generally unfavorable sign.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is of utmost importance for income-seeking investors.

The dividend per share values for Morgan Stanley over the past 20 years show significant fluctuations, particularly between 2007 and 2009. For instance, in 2008 the dividend dropped from $15.33 to $1.08, which is a significant decrease. Another considerable decline followed from $1.08 in 2008 to $0.437 in 2009. Despite these irregularities, more recent years from 2010 onwards display a more consistent upward trend with few significant drops. Therefore, while the historical stability of dividends is not ideal, recent trends indicate stability and incremental growth. Morgan Stanley seems to have rebounded and shown resilience in its dividend policies after the financial crisis of 2008. This trend can be considered good more recently, but with caution given the historical volatility.

Dividends Paid for Over 25 Years?

consistently paying dividends for over 25 years

Morgan Stanley has successfully paid dividends consistently from 1998 to 2023, showcasing a firm commitment to returning capital to its shareholders over an extended period. The dividends per share have seen significant fluctuations, peaking notably in 2007 with $15.33 per share, which is likely due to special dividends or extraordinary factors. However, the general upward trajectory and the dividend payouts reinstating their previous amounts post the 2008-2009 financial crisis illustrate strong financial resilience. This long-term dividend history generally indicates financial stability, profitability, and a shareholder-friendly management approach. Overall, this trend is positive for investors seeking dependable dividend income.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable Stock Repurchases and why it is important to consider

An essential indicator of financial health and shareholder value enhancement, reliable stock repurchases reflect a company's confidence in its own future performance. By buying back shares, the company can reduce the number of shares outstanding, thereby increasing the value of the remaining shares and potentially boosting earnings per share (EPS). Moreover, consistent repurchases may signal to investors that management believes the stock is undervalued, which can positively impact investor sentiment and stock price.