When people think of investing and asset management firms, Morgan Stanley (MS) doesn’t typically come to mind.  Most investors and beginner investors think of Fidelity, Vanguard, T. Rowe Price and the other modern brokers of Robinhood, Webull and the like.

However, how about investing in an investment firm with almost $5 trillion in assets under management?!  This could be a stock to buy in this volatile stock market.

Morgan Stanley Stock

Stock price is down only 4.5% on Morgan Stanley so far this year.  Meanwhile, T. Rowe Price (TROW), which we featured in a recent dividend stock video, is down almost 14% this year already.  What is keep Morgan Stanley’s price strong?

Revenue for Morgan Stanley, through their last earnings release, showcased extremely positive notes.  First, revenue was up 23% to $59.8 billion.  Second, net income was up 37% to $15 billion.

Then, there was the BIG merger that happened.  Morgan Stanley acquired E-Trade.  Not only E-Trade, but they also acquired Eaton Vance.  Morgan Stanley has been busy growing, which has equated to higher revenue and higher net income.

The stock price is actually up nearly 28% in the last 52-weeks.

The last few dividend increases have been amazing, as well, which we will cover below.

Further, Morgan Stanley seems to be firing on all cylinders across many fronts.  A top workplace, a top self-directed firm and they are #1 in the Advisor-Led arena.  How do the dividend stock metrics look, though?

Morgan Stanley stock dividend analysis

As you know it’s time to review Morgan Stanley with the Dividend Diplomat Stock Screener!  Here, we focus on 3 main dividend stock metrics:

1.) Price to Earnings Ratio (P/E): We look for the price to earnings ratio < the S&P 500 and the competition.

2.) Dividend Payout Ratio: The preferred dividend payout ratio is < 60%.  In fact, we believe the perfect payout ratio is between 40% and 60%.

3.) Dividend Growth Rate: Given we are dividend investing on our way to financial freedom, as we believe dividend income is the best source of passive income, we look at the 5 year dividend growth rate.  In addition, we review how many years the company has increased their dividend.

1.) P/E Ratio: Morgan Stanley has a price to earnings ratio, as of January 19th, of 12.71.  This actually is lower than the S&P 500, which is mid-26 and is similar to a large competitor – T. Rowe Price (TROW).  T. Rowe’s P/E ratio is around the same – 12.6.  Therefore, on par with the competition and seems to be valued appropriately.

2.) Dividend Payout Ratio: Morgan Stanley (MS) pays a dividend of $0.70 per quarter or $2.80 per year.  Taking $2.80 over $7.53 in forward earnings, equates to a dividend payout ratio for Morgan Stanley of 37%.  Almost in the perfect payout ratio range, but is low enough for strong dividend growth going forward and to continue to grow Morgan Stanley’s business with their earnings.

3.) Dividend Growth Rate: Morgan Stanley isn’t a dividend aristocrat, yet.  To be one you need to increase your dividend for 25+ years.  Morgan Stanley has increased their dividend fr 8 years now.  Further, the dividend growth rate is significant strong!  The average dividend growth rate has been 25%.  Think it’s slowing? No, that it is now.  Morgan Stanley’s latest dividend increase was 100%!  Morgan Stanley went from $0.35 to $0.70 in 2021, simply doubling their dividend.  Incredible for dividend investors out there.

Lastly, we’ll take a look at the dividend yield.  As an investor, you want to know how much owning this dividend stock pays you now!  The yield for Morgan Stanley is 2.92%, which is over 2x the S&P 500.  Further, this is HIGHER than T. Rowe Price’s dividend yield.  Therefore, you’re getting more than the competition, with an even higher dividend growth rate.

Is Morgan Stanley a dividend stock to buy?

Now that we’ve gone through the metrics, is Morgan Stanley a stock to buy for the dividend stock portfolio?

Morgan Stanley knocked this one out of the park!  What’s wild, though, is I almost own 100 shares in T. Rowe Price (TROW) and am on the fence if I want to star ta new dividend stock position.  However, how can Morgan Stanley be a dividend stock to buy?

From purely the dividend stock metrics, Morgan Stanley passes all of them.  A low price to earnings ratio, similar to the competition, but definitely low.  In addition, their dividend payout ratio is safe.  More than enough to not only cover the dividend but drastically increase the dividend, if they want to.

Then there is the dividend growth standpoint.  The key piece to growing your passive income is ensuring the asset can increase their income at a strong enough pace that can crush the rate of inflation.  Morgan Stanley has you covered here and then some.  I do not think they’ll be able to continue to double their dividend, but I do anticipate seeing double digit dividend increases, like we just saw with BlackRock (BLK).

Therefore, I’ll add them to my dividend stock watch list.  However, if you do not own an asset management firm, Morgan Stanley could be great for your dividend stock portfolio.  Obviously, perform your own research and make your own investment decision!

If you head over to our YouTube channel, you’ll find other undervalued dividend growth stocks that are higher on my list for stocks to buy now!

Were you buying T. Rowe Price stock instead of Morgan Stanley?  Or, were you buying BlackRock (BLK) stock versus these two?  Would love to see what stocks you are buying!  Share your comments and feedback below!

As always, thanks for stopping by, good luck and happy investing!

-Lanny