Is Intercontinental Exchange Inc (NYSE:ICE) A Top Dividend Stock?
A large part of investment returns can be generated by dividend-paying stock given their role in compounding returns over time. Historically, Intercontinental Exchange Inc (NYSE:ICE) has paid dividends to shareholders, and these days it yields 1.3%. Should it have a place in your portfolio? Let’s take a look at Intercontinental Exchange in more detail.
View our latest analysis for Intercontinental Exchange
5 checks you should use to assess a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
Does it pay an annual yield higher than 75% of dividend payers?
Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
Has the amount of dividend per share grown over the past?
Is is able to pay the current rate of dividends from its earnings?
Will it be able to continue to payout at the current rate in the future?
How well does Intercontinental Exchange fit our criteria?
The current trailing twelve-month payout ratio for the stock is 20.4%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect ICE’s payout to increase to 27.4% of its earnings, which leads to a dividend yield of 1.4%. However, EPS is forecasted to fall to $3.3 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A company with strong cash flow, relative to earnings, can sometimes sustain a high pay out ratio.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Unfortunately, it is really too early to view Intercontinental Exchange as a dividend investment. It has only been consistently paying dividends for 5 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Intercontinental Exchange produces a yield of 1.3%, which is on the low-side for Capital Markets stocks.
Next Steps:
Now you know to keep in mind the reason why investors should be careful investing in Intercontinental Exchange for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I’ve put together three important factors you should look at:
Future Outlook: What are well-informed industry analysts predicting for ICE’s future growth? Take a look at our free research report of analyst consensus for ICE’s outlook.
Valuation: What is ICE 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 ICE is currently mispriced by the market.
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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
