Unveiling the Sustainability and Growth Prospects of ICE's Dividend
Intercontinental Exchange Inc(ICE, Financial) recently announced a dividend of $0.42 per share, payable on 2023-09-29, with the ex-dividend date set for 2023-09-14. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's deep dive into Intercontinental Exchange Inc's dividend performance and assess its sustainability.
What Does Intercontinental Exchange Inc Do?
Intercontinental Exchange is a vertically integrated operator of financial exchanges and provides ancillary data products. Though the company is probably best known for its ownership of the New York Stock Exchange, which it acquired in 2013, ICE operates a large derivatives exchange, too. The company's largest commodity futures product is the ICE Brent crude futures contract. In addition to the exchanges business, which is about 56% of net revenue, Intercontinental Exchange has used a series of acquisitions to create its mortgage technology business (15% of net revenue) and fixed-income and data services segment (29% of net revenue).
A Glimpse at Intercontinental Exchange Inc's Dividend History
Intercontinental Exchange Inc has maintained a consistent dividend payment record since 2013. Dividends are currently distributed on a quarterly basis. Intercontinental Exchange Inc has increased its dividend each year since 2013. The stock is thus listed as a dividend achiever, an honor that is given to companies that have increased their dividend each year for at least the past 10 years.
Breaking Down Intercontinental Exchange Inc's Dividend Yield and Growth
As of today, Intercontinental Exchange Inc currently has a 12-month trailing dividend yield of 1.37% and a 12-month forward dividend yield of 1.44%. This suggests an expectation of increased dividend payments over the next 12 months.
Over the past three years, Intercontinental Exchange Inc's annual dividend growth rate was 11.40%. Extended to a five-year horizon, this rate increased to 12.90% per year. Based on Intercontinental Exchange Inc's dividend yield and five-year growth rate, the 5-year yield on cost of Intercontinental Exchange Inc stock as of today is approximately 2.51%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-06-30, Intercontinental Exchange Inc's dividend payout ratio is 0.53.
Intercontinental Exchange Inc's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Intercontinental Exchange Inc's profitability 8 out of 10 as of 2023-06-30, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Intercontinental Exchange Inc's growth rank of 8 out of 10 suggests that the company's growth trajectory is good relative to its competitors.
Revenue is the lifeblood of any company, and Intercontinental Exchange Inc's revenue per share, combined with the 3-year revenue growth rate, indicates a strong revenue model. Intercontinental Exchange Inc's revenue has increased by approximately 14.00% per year on average, a rate that outperforms than approximately 63.73% of global competitors.
The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Intercontinental Exchange Inc's earnings increased by approximately -9.00% per year on average, a rate that outperforms than approximately 26.09% of global competitors.
Lastly, the company's 5-year EBITDA growth rate of -0.50%, which outperforms than approximately 25.07% of global competitors.
Conclusion
Intercontinental Exchange Inc's consistent dividend payments, impressive growth rate, and low payout ratio highlight its ability to sustain dividends in the long run. The company's high profitability and robust growth metrics further reinforce this narrative. However, investors must continue to monitor these metrics to ensure the company's continued dividend performance. Will Intercontinental Exchange Inc continue to uphold its dividend achiever status? Only time will tell.
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