MSC Industrial Direct Co. Inc. (MSM) is currently trading at $73.68, down from previous highs around $105 back in 2017 and a one-year high of ~$90 last November. While the outlook for the manufacturing sector continues to look weak, recession fears are already priced in to MSM’s stock price. Despite relatively sluggish growth as of late, MSC Industrial continues to generate plenty of cash to sustain it through this current manufacturing climate. A fast-growing yield that currently sits at slightly over 4% and a low payout ratio make MSM one of the most attractive dividend stocks in the manufacturing sector at the moment.
MSC Industrial is a leading distributor of products and services related to the manufacturing industry. The company serves a broad range of customers throughout the United States, Canada, Mexico, and the United Kingdom. Virtually every plant across the country rely on distributors such as MSC to provide replacement parts for machines, as well as other equipment to keep operations running smoothly. While this business model potentially leaves MSM exposed to the trade war on two fronts (increased manufacturing costs and decreased demand from customer companies), this seemingly has been priced into MSM’s stock with the ~30% decline since 2017.
While growth has been nothing special over the past five years, the inevitable end to the trade war should provide the next leg of growth for a company which is currently trading at a trailing P/E of around 14.