Up to date on November ninth, 2023
The Dividend Kings are a selective group of shares which have elevated their dividends for no less than 50 years in a row. We consider the Dividend Kings are among the many highest-quality dividend development shares to purchase and maintain for the long run.
With this in thoughts, we created a full record of all of the Dividend Kings. You may obtain the total record, together with necessary monetary metrics akin to dividend yields and price-to-earnings ratios, by clicking the hyperlink beneath:
One of many latest members to hitch this record is S&P International (SPGI). S&P International, like all Dividend Kings, has a really spectacular dividend monitor document. It has paid a dividend yearly since 1937 and has raised its dividend for 50 years in a row.
This text will talk about the corporate’s enterprise overview, development prospects, aggressive benefits, and anticipated returns.
Enterprise Overview
S&P International is a worldwide supplier of economic companies and enterprise data. The corporate traces its roots again to 1917 when McGraw Publishing Firm and the Hill Publishing Firm got here collectively. The corporate was first named McGraw Hill Monetary. In 1957, McGraw Hill launched the S&P 500, probably the most widely-recognized index of all large-cap U.S. shares.
S&P International gives monetary companies to the worldwide capital and commodity markets, together with credit score scores, benchmarks, analytics, and different information to commodity market members, capital markets, and automotive markets. The corporate’s 5 divisions are: Scores, Market Intelligence, Commodity Insights, Mobility, and S&P Dow Jones Indices.
S&P International has a extremely worthwhile enterprise mannequin. It’s the business chief in credit score scores and inventory market indexes, which allows it to generate high-profit margins and development alternatives.
Supply: Investor Presentation
Notably, on February twenty eighth, 2022, S&P International merged with HIS Markit. The merger permits the corporate to supply a stronger, extra numerous product portfolio on a good bigger scale. The corporate as we speak has a market capitalization of practically $120 billion and generates $12 billion of annual income.
S&P International posted third quarter earnings on November 2nd, 2023, and outcomes have been higher than anticipated on each the highest and backside traces. Adjusted earnings-per-share got here to $3.21, which was 17 cents forward of expectations. Income was up nearly 8% year-over-year to $3.08 billion, which was $50 million forward of estimates.
Bills have been $2.02 billion, down from $2.08 billion, and roughly flat year-over-year. Adjusted working revenue was $1.47 billion, up from $1.44 billion in Q2, and up from $1.32 billion a yr in the past.
Progress Prospects
S&P International has a formidable monitor document. It has grown its earnings-per-share at a 19% compound annual development fee during the last eight years.
The corporate’s previous development has been the results of a collection of secular developments, that are, in truth, nonetheless current as we speak. Provided that company debt has been extremely popular within the final decade, buoyed by low world rates of interest, enterprise scores have been necessary. With the current improve in rates of interest, buyers are prone to preserve an in depth eye on these scores. Nevertheless, on account of elevated charges, fewer debt issuances come up, negatively impacting S&P International’s outcomes.
Moreover, the growing demand for monetary evaluation and ETFs ought to help in rising the corporate’s merchandise and earnings.
Share buybacks can even help in development on a per-share foundation. The corporate additionally famous it was beginning a brand new $1.3 billion accelerated share repurchase program, price about 1% of the present float.
The corporate has additionally been very lively in acquisitions and divestments to reinforce its enterprise. First, the corporate accomplished a big merger with HIS Market in February 2022. In December 2022, the corporate acquired the Shades of Inexperienced enterprise from the Heart for Worldwide Local weather Analysis. This acquisition expanded S&P International Scores’ second-party opinions (SPOs) providing.
And on January seventeenth, 2023, S&P International agreed to promote its Engineering Options Enterprise to KKR for $975 million in money, which might equal roughly $750 million after tax and be utilized to repurchase its personal shares.
Supply: Investor Presentation
Management just lately acknowledged that they anticipate to attain 7% to 9% natural annual income development by 2025 – 2026. The corporate additionally expects to attain an adjusted working margin between 48% to 50% and low to mid-teens development in annual adjusted diluted EPS.
We forecast that S&P International can develop its earnings-per-share by 10% over the following 5 years.
Aggressive Benefits & Recession Efficiency
S&P International advantages from a number of aggressive benefits. The corporate operates within the extremely concentrated monetary scores business. It’s certainly one of solely three main credit standing companies within the U.S. that management over 90% of world monetary debt scores. The opposite two are Moody’s (MCO) and Fitch Scores.
The corporate possesses a robust moat as there are large limitations to entry in its business. New entrants would discover it tough, if not unattainable, to garner the required belief from the monetary business and authorities to change into an accepted ranking company.
S&P International’s aggressive benefit and moat enabled it to stay worthwhile even in the course of the Nice Recession when earnings decreased by -21% to $2.33. Whereas many firms have been getting ready to collapse, S&P International was removed from reporting losses.
Throughout the COVID-19 pandemic disaster, S&P International’s outcomes held up tremendously, and the corporate achieved new document outcomes yr after yr.
Valuation & Anticipated Returns
Primarily based on our estimate for 2023 earnings-per-share of $12.55 and a present share value of $388, shares of S&P International are buying and selling at a P/E ratio of 30.9.
This valuation is wealthy for S&P International, which has traded for a mean P/E ratio of about 23 during the last 5 years. Our truthful worth estimate for the corporate is 26 instances earnings, contemplating the corporate has produced robust outcomes lately.
Shares look like overvalued, buying and selling effectively forward of our estimates. If shares have been to retreat to a price-to-earnings ratio of 26.0 over the following 5 years, buyers would see a discount in annual returns of three.4%.
The inventory additionally has a present dividend yield of 0.9%. The dividend is very safe, with a payout ratio of solely 29%. Nevertheless, the yield is just not significantly engaging for revenue buyers.
Mixed with the estimated 10% earnings-per-share development fee, S&P International is forecasted to generate whole returns of seven.5% per yr via 2028. Given this fee of return, S&P International shares are rated a maintain.
Remaining Ideas
S&P International has skilled large development within the final decade. Its aggressive benefits and robust place in its ranking business oligopoly will proceed to guard the corporate’s draw back. Mixed with its robust share buyback program and strategic mergers & acquisitions exercise, the corporate has a vibrant future nonetheless.
The corporate has now achieved Dividend King standing following its fiftieth consecutive annual dividend improve. Nonetheless, the low dividend yield is just not so interesting.
For the time being, although, shares are buying and selling for a wealthy valuation, which gravely reduces the attractiveness of the inventory.
Moreover, the next Certain Dividend databases comprise probably the most dependable dividend growers in our funding universe:
If you happen to’re on the lookout for shares with distinctive dividend traits, take into account the next Certain Dividend databases:
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