Safety equipment maker MSA Safety (MSA -0.01%) reported disappointing earnings after the market closed on Tuesday. On Wednesday, its shares dropped on the news. In fact, it was the day's worst performer in the real-money Inflation-Protected Income Growth portfolio, both on a dollar and a percentage basis.

MSA Safety's immediate drop on the bad news was completely understandable. Still, the good news is that the announcement sets up the company's upcoming dividend disclosure to be an incredibly important signal of what's really happening to the company.

What the dividend will tell you
MSA Safety has a 42-year history of increasing its regular dividend each year. The company has now paid four consecutive quarterly dividends at $0.30 per share and is due to announce its next payout in May.

However, the company hasn't always raised its dividend every four quarters; indeed, during the financial crisis, it held its dividend flat from May 2008 to February 2010. Still, because of the timing, it did pay higher total regular dividends in each of those calendar years.

In Tuesday's earnings announcement, MSA Safety blamed its income shortfall on both a challenging global business environment and government delays in approving its new respiratory equipment. At the same time, the company was optimistic about its prospects based on its order activity and backlog.

This dichotomy between the company's recent results and its future expectations, along with its proven willingness to suspend its every-four-quarters pattern of dividend raises, makes this upcoming announcement a bellwether from a signaling perspective. If MSA Safety holds its dividend flat despite that history of increases, it's a sign that the company may still be facing those regulatory hurdles or is otherwise extra-concerned about its near-term future. Should that occur, MSA Safety wouldn't be alone in signaling future worries via its dividend. In the recent past, both industrial titan General Electric (GE -0.98%) and microprocessor giant Intel (INTC -2.23%) suspended their dividend increases as their situations turned from bad to worse.

General Electric cut its multidecade-streak of payout hikes during the financial crisis, before eventually reducing the dividend in 2009 due to to the excess leverage that had built up in its GE Capital division. Stopping the dividend raises was the clearest indicator the company gave, prior to the cut, of just how bad things had become.

Intel didn't have quite the dividend growth history of General Electric when it stopped increasing its payments. Still, Intel is today holding its quarterly dividend flat at $0.225 per share, where it has sat since mid-2012. Intel's recent earnings releases have been somewhere between mixed and disappointing as the processor market shifts to less power-hungry mobile devices and away from Intel's high-performance domain. As with General Electric, Intel's flat dividend foretold future weakness.

If MSA Safety increases its dividend despite its recently reported earnings weakness, it will be a sign of management's continued confidence in the company's future. After all, it takes cash to pay a dividend -- and it takes even more cash to raise that dividend. The only sustainable way to pay and increase a dividend is to earn the money to cover the rising payments.

Of course, even an increased dividend would not be a guarantee of future success. But even then, the dividend remains a good signal. If MSA Safety raises its payout but continues to struggle operationally, its dividend coverage will start to slip, and the problems will manifest in developments like an unsustainably high payout ratio.

So what?
In other words, no matter what MSA Safety does with its dividend in May, the announcement will tell at least part of a story about what management thinks is really happening with the company. Because that dividend is based on cold, hard cash and MSA Safety's ability to generate it, it's certainly a story that investors should pay attention to.

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