CME Group Approves Huge Annual Dividend, Launches $3 Billion Buyback Plan
Key Points
- CME Group announced a $5.80 per share annual dividend.
- This annual dividend is 11% higher than the previous year.
- This is in addition to a $1.15 per share quarterly dividend, making it a top dividend stock.
The financial services firm has one of the best dividends in the sector, and it just got better.
CME Group (NASDAQ:CME) has been in a giving mood as of late. Last week, CME, which runs the world’s leading derivatives marketplaces, offered investors a massive annual dividend payout and launched a $3 billion stock repurchase plan.
The annual variable dividend is in addition to CME Group’s already robust quarterly dividend. Combined, the quarterly and annual dividends make CME Group one of the best dividend stocks on the market.
The stock has also been one of the most consistent performers in the sector, up 13% year-to-date. Over the past 10 years, CME stock has had an average annual return of 14.4%, with the dividend reinvested. That beats the S&P 500.
11% boost to annual dividend
CME Group has offered shareholders an annual variable dividend since 2012, whereby the company distributes an additional payout at the end of the year based on the availability of excess cash. The amount varies based on the company’s operating results that year.
This year has been a great year for CME Group, as it declared an annual variable dividend of $5.80 per share. That is up from $5.25 per share in 2023, and $4.50 in 2022.
This is on top of the quarterly dividend of $1.15 per share the company gave out in the fourth quarter. All totaled, CME investors earned $10.40 per share this year, marking the 14th consecutive year of dividend increases.
So, if you owned 100 shares of CME stock, you would have earned $1,040 in dividend payouts this year. That money could be either pocketed or reinvested back into the stock.
Including the annual dividend, CME’s dividend yield is 4.90%, making it one of the highest yields in the financial sector, and among the top yields across sectors.
The high end of year payout was made possible by a record-setting third quarter, where CME had a record $1.6 billion in revenue and $913 million in net income, a 21% year-over-year increase. This was due to record trading volume in its marketplaces, which include the Chicago Mercantile Exchange, Globex, the Chicago Board of Trade, and the New York Mercantile Exchange, among others.
The overall marketplace reported average daily trading volume of 28.3 million in the quarter, a record. CME, which is a leading marketplace for Treasury and interest rate traders, has benefitted from high interest rates and strength in the bond and money markets.
And the momentum for CME continued in the fourth quarter as CME Group had ADV of 24.3 million in October and a record 30.2 million ADV in November. This was driven by record interest rate trading.
$3 billion stock buyback announced
In addition to the robust annual dividend, CME group also announced that it was launching a $3 billion share repurchase plan.
“The combination of a flexible share repurchase program with our existing quarterly and annual variable dividend structure allows us to efficiently return capital and addresses the different interests and preferences of our diverse shareholder base,” CME Group Chairman and CEO Terry Duffy said.
The timing, prices, and sizes of stock purchases under the share repurchase plan will depend upon the stock price, as well as market conditions. But generally, stock buybacks help boost the stock price, as it reduces the number of shares outstanding, thus making existing shares more valuable.
Companies will typically launch stock buybacks after a period of strong growth, particularly if their stock price is still trading at a fair value. That is the case with CME, with a forward P/E ratio of 22.
This post originally appeared at ValueWalk.com.
Category: Dividend Stocks
