Revealed on January twenty seventh, 2023 by Quinn Mohammed

The Dividend Kings are a selective group of shares which have elevated their dividends for at the least 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’ll be able to obtain the total record, together with essential monetary metrics similar to dividend yields and price-to-earnings ratios, by clicking the hyperlink beneath:

 

The most recent member to affix this record is S&P International (SPGI). S&P International, like all Dividend Kings, has a really spectacular dividend monitor report. It has paid a dividend yearly since 1937 and has raised its dividend for 50 years in a row. The corporate most lately raised its dividend by 6.4% on January 25^th, 2023.

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 monetary providers 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, essentially the most widely-recognized index of all large-cap U.S. shares.

S&P International affords monetary providers to the worldwide capital and commodity markets, together with credit score scores, benchmarks, analytics, and different knowledge to commodity market members, capital markets, and automotive markets. The corporate’s 5 divisions are: Rankings, 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 an excellent bigger scale. The corporate in the present day has a market capitalization of practically $120 billion and generates $12 billion of annual income.

On October twenty seventh, 2022, S&P International reported third-quarter outcomes. The corporate posted adjusted earnings-per-share of $2.93, which was 13 cents forward of expectations however 4% decrease year-over-year. Alternatively, income grew by 37% in comparison with the prior yr interval however was $60 million wanting estimates. Adjusted working revenue decreased by 200 foundation factors to 46.0% of income in comparison with Q3 2021.

Our 2022 adjusted earnings-per-share estimate stands at $11.10.

Progress Prospects

S&P International has a powerful monitor report. The corporate has grown its earnings-per-share yearly for over a decade. Nevertheless, this streak might finish as soon as fourth quarter 2022 outcomes are reported, as we’re forecasting S&P International to declare it has generated $11.10 in EPS for 2022, which can be in line with the analysts’ consensus. Nonetheless, S&P International has grown its earnings-per-share at a staggering price of 19.3% 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 in the present day. Provided that company debt has been extremely popular within the final decade, buoyed by low international rates of interest, enterprise scores have been essential. With the latest improve in rates of interest, buyers are more likely to maintain an in depth eye on these scores. Nevertheless, because 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 support in rising the corporate’s merchandise and earnings.

Share buybacks can even support in development on a per-share foundation. As of the top of the third quarter of 2022, S&P International had repurchased $11 billion price of shares on its $12 billion accelerated share repurchase program. Over the past eight years, S&P International has decreased its excellent shares by roughly 1.5% yearly.

The corporate has additionally been very energetic in acquisitions and divestments to reinforce its enterprise. First, the corporate accomplished a big merger with HIS Market in February 2022.

Then on December 6^th, 2022, the corporate acquired the Shades of Inexperienced enterprise from the Heart for Worldwide Local weather Analysis. This acquisition will increase S&P International Rankings’ second-party opinions (SPOs) providing.

And on January 17^th, 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 lately said that they count on 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.

Whereas S&P International is anticipated to take a minimize in earnings-per-share for 2022, the corporate appears solidly on foot to return to development instantly within the following yr and past, as its secular tailwinds are intact.

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 one in every of solely three main credit standing businesses within the U.S. that management over 90% of world monetary debt scores. The opposite two are Moody’s (MCO) and Fitch Rankings.

The corporate possesses a powerful moat as there are super obstacles to entry in its business. New entrants would discover it troublesome, if not inconceivable, to garner the mandatory belief from the monetary business and authorities to turn into an accepted score company.

S&P International’s aggressive benefit and moat enabled it to stay worthwhile even through the Nice Recession when earnings decreased by -21% to $2.33. Whereas many firms had been on the point of 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 report outcomes yr after yr.

Valuation & Anticipated Returns

Based mostly on our estimate for 2022 earnings-per-share of $11.10 and a present share value of simply above $366, shares of S&P International are buying and selling at a P/E ratio of 33.0.

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 honest worth estimate for the corporate is 26 instances earnings, contemplating the corporate has produced sturdy outcomes in recent times.

Shares seem like overvalued, buying and selling properly forward of our estimates. If shares had 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 4.6%.

The inventory additionally has a present dividend yield of 1.0%. The dividend is extremely safe, with a payout ratio of solely 31%. Nevertheless, a 1.0% yield just isn’t notably engaging for revenue buyers.

Mixed with the estimated 10% earnings-per-share development price, S&P International is forecasted to generate whole returns of 6.0% per yr via 2028. Given this price of return, S&P International shares aren’t very compelling at the moment.

Last Ideas

S&P International has skilled super development within the final decade. Its aggressive benefits and powerful place in its score business oligopoly will proceed to guard the corporate’s draw back. Mixed with its sturdy share buyback program and strategic mergers & acquisitions exercise, the corporate has a shiny future nonetheless.

The corporate has now achieved Dividend King standing following its 50^th consecutive annual dividend improve. Nonetheless, the low dividend yield of 1.0% just isn’t so interesting. One thing to remember is that the ahead dividend now’s 3 times the dividend paid in 2013.

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 essentially the most dependable dividend growers in our funding universe:

When you’re searching for shares with distinctive dividend traits, take into account the next Certain Dividend databases: