The CME Group is comprised of the Chicago Mercantile Exchange, COMEX, Chicago Board of Trade, and the New York Mercantile Exchange.  CME is the largest group of derivatives exchanges in futures contracts and options.  Basically, really cool shit trades on their exchanges that money managers would be interested in using to hedge their portfolios.  Volumes have been increasing consistently year over year on these exchanges.

The other day CME announced their 4th straight year of dividend increases.  The quarterly dividend was increased from $0.60 to $0.66 per share, representing a 10% increase for the year.  This brings the current dividend yield to 2.22%.  This increase beats my expectation of a $0.05 increase to the dividend by $0.01.  CME has had 12 dividend increases since going public in 2003.  You should also read about their history of special dividends.

A Look at the Regular Dividend History:

The above spreadsheet looks solely at the regular quarterly dividend and does not include any of the special dividends.

What’s impressive about the dividend from CME, despite having 3 years with no increase and snapping streaks, is the growth of the quarterly dividend.  Since paying the very first quarterly dividend of $0.028 back in 2003, up to the most recent upcoming dividend of $0.66 in 2017, the average annual growth rate has been an amazing 25.41%.  Imagine your annual pay increasing that much every year.  When we look at the annualized dividends from 2003 to 2017, dividend income alone has grown a total of 1,995.23%.  Simply amazing.  So 2 questions to ask: How has the stock performed? and Is the dividend sustainable?

CME vs S&P500

If a picture is worth a 1000 words, then I guess this picture shows you that CME has handily outperformed the S&P500 by over 1000% since 2003.  So the answer to how has the stock performed? One word, amazingly.

Company Stats:

Market Cap: $40.38Billion

PE Ratio: 27.73

Dividend Yield: 2.22%

Beta: 0.69

Profit Margin: 42.67%

Total Cash: $1.95 Billion

Total Debt: $2.23 Billion

Payout Ratio: 53.61%

Healthy profit margin, good cash on hand, relatively low debt.  Looking at that payout ratio, shows they still have room for increasing their dividend years down the road, while also continuing their occasional special dividends.

Conclusion:

Looking at the above spreadsheet and charts, you can figure out that CME is a favorite long term holding of mine.  I have a 2 year price target of $140 and believe the dividend has room to grow over the next 2 years around 10% each year.  The best years of dividend growth being in the 30% area may be behind, but I can see a continued high single digit dividend growth going beyond 2019.

 

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