Is Intercontinental Exchange, Inc. (NYSE:ICE) A Good Dividend Stock?
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Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Historically, Intercontinental Exchange, Inc. (NYSE:ICE) has paid a dividend to shareholders. It currently yields 1.4%. Does Intercontinental Exchange tick all the boxes of a great dividend stock? Below, I'll take you through my analysis.
Check out our latest analysis for Intercontinental Exchange
5 questions I ask before picking a dividend stock
Whenever I am looking at a potential dividend stock investment, I always check these five metrics:
Is its annual yield among the top 25% of dividend-paying companies?
Has it paid dividend every year without dramatically reducing payout in the past?
Has dividend per share amount increased over the past?
Can it afford to pay the current rate of dividends from its earnings?
Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Intercontinental Exchange fit our criteria?
Intercontinental Exchange has a trailing twelve-month payout ratio of 28%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect ICE's payout to remain around the same level at 29% of its earnings. Assuming a constant share price, this equates to a dividend yield of around 1.5%. In addition to this, EPS should increase to $3.47.
When thinking about whether a dividend is sustainable, another factor to consider is the cash flow. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If there is one thing that you want to be reliable in your life, it's dividend stocks and their constant income stream. The reality is that it is too early to consider 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 1.4%, which is on the low-side for Capital Markets stocks.
Next Steps:
After digging a little deeper into Intercontinental Exchange's yield, it's easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. 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. I've put together three relevant aspects you should further examine:
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
