1 Dividend King Up 4,360% Since 2000 to Add to Your Portfolio for a Lifetime of Passive Income

Dividend Kings are an elite group of roughly 50 companies that have raised their payouts to shareholders yearly for half a century or more. They're primarily steady-Eddie businesses with predictable and safe operations and not the sort of stocks you'd expect to deliver market-stomping returns.

One Dividend King that counters this thought, however, is MSA Safety (NYSE: MSA), which has turned in total returns north of 4,360% since the start of the new millennium. With that 44-bagger return behind it over just the last 24 years, you might think that it would be too late to buy into this unique safety specialist, but the company's most promising days could still be right in front of it.

Here's why MSA Safety is a stellar investment for investors looking for a lifetime of passive income and the potential to beat the market.

Meet MSA Safety

MSA is a global leader in providing safety products and software that protects employees while they are at work. The company's three core categories are:

• Fire service (39% of sales): Products include self-contained breathing apparatus, helmets, protective apparel, and boots for fire stations and first-responder units.
• Detection (35% of sales): These are products for fixed gas and flame detection, portable gas detection, and refrigerant detection and identification. The company sells them to numerous end markets, including energy, utilities, water, wastewater, industrial, food retail, and heating, venting, air conditioning, and refrigerating (HVAC-R).
• Industrial personal protection equipment and other (26% of sales): Products in this segment include industrial head protection, fall protection, air-purifying respirators, and other personal protection equipment, which it sells to a wide array of customers.

MSA is laser-focused on maintaining its leadership position in its niche, and counts over 1,100 patents as proof of its innovative DNA. Further proof of its commitment to innovation is its hefty R&D budget, which equals roughly 4.5% of sales. And the company improves customer loyalty by paying close attention to customer feedback as it develops new product iterations.

Landing on The Drucker Institute's Top 250 Best-Managed Businesses in 2023, MSA earned one of the highest scores for customer satisfaction, highlighting that its R&D efforts are paying dividends. Furthermore, this constant iteration means that the company has historically generated roughly 35% of its sales from products developed and launched in the last five years, making it difficult for peers to compete with.

Boasting a 92% employee retention rate, MSA's company culture stands out, whether through the eyes of workers or customers.

Dividend growth could accelerate

While MSA's streak of 54 consecutive years of annual dividend increases is impressive enough on its own, the potential for accelerating dividend growth is what makes the stock an interesting option to buy today.

Currently, 45% of the company's R&D team consists of software specialists, which suggests that MSA could be just beginning to pursue its longer-term ambitions.

Should MSA's profitability continue trending higher, it would be well positioned to raise its dividend payments more quickly than the 5% annualized rate it delivered over the last decade. At the current share price and payout rate, the stock yields 1.1%, but it only took 22% of its free cash flow (FCF) over the last year to cover that dividend, so it has plenty of capacity to increase it.

MSA Safety: A premium business at a fair price

Trading with an FCF yield of 4.8% (the inverse of the price-to-FCF ratio, so the higher the number, the cheaper the stock), MSA Safety is at its best valuation since 2019 and is cheaper than the S&P 500 in general.

MSA Free Cash Flow Yield data by YCharts.

Measured against MSA's consistent product sales (non-discretionary purchases for public safety) -- which management believes will grow organically by 4% to 5% through 2028 -- the company looks like a premium business trading at a fair price.

The combination of steady growth and reasonable valuation, paired with the company's improving margins and rising return on invested capital of 21% (a hallmark of outperforming stocks), makes MSA Safety a top pick for investors looking for passive income.

Should you invest $1,000 in MSA Safety right now?

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Josh Kohn-Lindquist has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.