Income investors looking for a mix of current yield and dividend growth should take a closer look at S&P Global Inc. (SPGI). S&P Global is a worldwide provider of financial services and business information, with annual revenue of over $13 billion, notes Bob Ciura, contributing editor at Sure Dividend.
Through its various segments, it provides credit ratings, benchmarks and indices, analytics, and other data to commodity market participants, capital markets, and automotive markets. The company’s early-2022 acquisition of IHS Markit boosted its pro forma revenue by about 50%.
S&P Global posted third-quarter earnings on Oct. 24, 2024, and results were quite strong once again. Adjusted earnings per share came to $3.89, which was 25 cents ahead of estimates. Earnings were down from $4.04 in Q2, but much higher than $3.21 in the year-ago period.
Revenue increased 16% year-on-year to $3.58 billion, which also beat estimates by $150 million. Growth in the Ratings and Indices segment led the top line higher in Q3, although strength was broad. The strong results prompted a guidance boost from management for both revenue and earnings. In addition, the company accelerated its share repurchases in the amount of $1.3 billion before year end.
We forecast S&P Global to grow its adjusted EPS by 12% per year over the next five years. The most important feature of S&P Global is its strong competitive position. It operates in the highly concentrated financial ratings industry, where the three well-known rating agencies control over 90% of global financial debt ratings.
S&P Global’s business has benefited from a series of favorable secular trends. Since the Great Recession in 2009, total corporate debt has been on a steady rise, which means more ratings are needed. Lower global interest rates have continued to more and more issuances of debt. Investors are also becoming increasingly sophisticated, demanding more real-time data and analytics. There is also an accelerating demand for index-related investments, such as ETFs.
Income investors may not see the appeal of SPGI stock due to its low recent dividend yield of 0.7%. However, it makes up for a low current yield with strong dividend growth. S&P Global has paid dividends continuously since 1937 and has increased its payout for 51 consecutive years. That makes it one of the newest members of the prestigious Dividend Kings.
With a projected dividend payout ratio of 24% for 2024, the dividend is highly secure, with room for continued dividend increases in the years ahead. Total returns are expected to reach 10% per year over the next five years, earning the stock a buy rating from Sure Dividend.
