The board of Intercontinental Exchange, Inc. (NYSE:ICE) has announced that it will be paying its dividend of $0.52 on the 31st of March, an increased payment from last year’s comparable dividend. This takes the annual payment to 1.2% of the current stock price, which unfortunately is below what the industry is paying.
Intercontinental Exchange’s Payment Could Potentially Have Solid Earnings Coverage
If it is predictable over a long period, even low dividend yields can be attractive. However, Intercontinental Exchange’s earnings easily cover the dividend. This means that most of what the business earns is being used to help it grow.
Over the next year, EPS is forecast to expand by 35.1%. If the dividend continues on this path, the payout ratio could be 28% by next year, which we think can be pretty sustainable going forward.
Intercontinental Exchange Has A Solid Track Record
Even over a long history of paying dividends, the company’s distributions have been remarkably stable. Since 2016, the annual payment back then was $0.60, compared to the most recent full-year payment of $2.08. This implies that the company grew its distributions at a yearly rate of about 13% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.
The Dividend Has Growth Potential
Some investors will be chomping at the bit to buy some of the company’s stock based on its dividend history. It’s encouraging to see that Intercontinental Exchange has been growing its earnings per share at 9.1% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Intercontinental Exchange’s prospects of growing its dividend payments in the future.