Is CMC Markets Plc (LON:CMCX) A Good Pick For Income Investors?
A sizeable part of portfolio returns can be produced by dividend stocks due to their contribution to compounding returns in the long run. Over the past 2 years, CMC Markets Plc (LSE:CMCX) has returned an average of 5.00% per year to shareholders in terms of dividend yield. Does CMC Markets tick all the boxes of a great dividend stock? Below, I’ll take you through my analysis. See our latest analysis for CMC Markets
How I analyze a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
Is it paying an annual yield above 75% of dividend payers?
Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
Has the amount of dividend per share grown over the past?
Is it able to pay the current rate of dividends from its earnings?
Will it have the ability to keep paying its dividends going forward?
How well does CMC Markets fit our criteria?
The company currently pays out 51.75% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect CMCX’s payout to increase to 59.79% of its earnings, which leads to a dividend yield of 5.53%. However, EPS is forecasted to fall to £0.13 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income. Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. Unfortunately, it is really too early to view CMC Markets as a dividend investment. It has only been consistently paying dividends for 2 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. In terms of its peers, CMC Markets has a yield of 5.86%, which is high for Capital Markets stocks.
Next Steps:
With these dividend metrics in mind, I definitely rank CMC Markets as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. Below, I’ve compiled three pertinent factors you should further examine:
Future Outlook: What are well-informed industry analysts predicting for CMCX’s future growth? Take a look at our free research report of analyst consensus for CMCX’s outlook.
Valuation: What is CMCX worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether CMCX is currently mispriced by the market.
Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
