Last update on 2024-06-27

Intercontinental Exchange (ICE) - Dividend Analysis (Final Score: 4/8)

Analyze Intercontinental Exchange (ICE) dividend policies, performance, and stability through an 8-criteria scoring system. Final score: 4/8.

Short Analysis - Dividend Score: 4

We're running Intercontinental Exchange (ICE) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

The 8-criteria dividend analysis of Intercontinental Exchange (ICE) reveals both strengths and weaknesses. The dividend yield of 1.3081% is below the industry average of 2.13%, indicating a conservative yield policy. The average annual dividend growth rate exceeds 5%, showing some inconsistency but overall indicating growth. The payout ratio has been well below 65% at an average of 16.62%, denoting a focus on reinvestment. Dividend coverage by earnings and cash flow has been strong, ensuring reliability. Dividends have been stable since they were initiated in 2013, but ICE falls short of paying dividends for over 25 years. Lastly, ICE has a pattern of reliable stock repurchases, which underscores financial health.

Insights for Value Investors Seeking Stable Income

Considering the comprehensive analysis, Intercontinental Exchange (ICE) shows strong and stable dividend growth and excellent dividend coverage, both by earnings and cash flow. However, its lower-than-average dividend yield and the relatively short history of paying dividends (from 2013) might be limiting for some conservative investors. Nonetheless, for those looking for growth potential and reliable returns, ICE presents a compelling case. Therefore, it is worth considering for investors with an interest in long-term growth and stable dividends.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield is an important metric that indicates how much a company pays in dividends each year relative to its stock price.

Intercontinental Exchange (ICE) has a current dividend yield of 1.3081%, which is below the industry average of 2.13%. Examining the data over the past 20 years, ICE began paying dividends in 2013 and has gradually increased its dividend payouts to the present level. The yield has fluctuated slightly, with peaks and dips reflecting changes in either the stock price or the dividend payments. Comparatively, the industry average has also seen fluctuations but generally stayed higher. In this context, a lower dividend yield might suggest that ICE is either more focused on growth and reinvestment or that the stock price has surged significantly, somewhat diluting the yield percentage. Considering the stock price track record that has consistently risen over the years, ICE’s focus might very well be on reinforcing and expanding its market position while offering moderate yields. Although the yield is below the industry average, the stability and continual growth of dividend per share make it a good trend, albeit conservative.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate examines the annual percentage increase in dividends. A rate above 5% is desirable as it suggests that a company consistently generates sufficient profit to return to shareholders, indicating financial stability and growth potential.

Reviewing the Dividend Ratio of Intercontinental Exchange (ICE) in the past 20 years shows significant fluctuations. While the company's average dividend ratio is 20.88%, indicating a strong growth rate, several negative and extraordinary spikes are present. For instance, extreme values such as 300% in 2014 and -20% in 2018, portray dividend instability. Most years saw an increase over 5%, implying good growth in dividends on average, but this volatility may concern conservative investors. Overall, the aim for consistent and moderate dividend growth has been inconsistently met, suggesting a somewhat unstable but generally positive trend.

Average annual Payout Ratio lower than 65% in the last 20 years?

The payout ratio shows the percentage of net earnings distributed to shareholders in the form of dividends. A lower ratio suggests more earnings are retained for growth.

Based on the data provided, Intercontinental Exchange (ICE) has maintained an average payout ratio of approximately 16.62% over the last 20 years, which is significantly lower than the 65% threshold. This trend is positive for the company as it demonstrates a conservative approach to dividend payouts, reflecting a focus on reinvesting earnings for growth and potentially insulating against market volatility. Apart from a temporary spike to 58.76% in 2022, which might be due to extraordinary circumstances, the payout ratio has otherwise remained well below 40%, further emphasizing prudent financial management. This suggests strong sustainability of dividends as the company has ample room to adjust for any market downturns or reinvest in core business operations.

Dividends Well Covered by Earnings?

Dividends being covered by earnings is key as it indicates financial health and sustainability. A payout ratio below 100% signifies earnings can support dividends, a crucial factor for dividend reliability.

Examining the EPS and DPS values from 2003 to 2023, we see that dividends were initiated in 2013. Coverage ratios post-2013 vary between 20.21% and 58.76%. The higher the ratio, the better the coverage. From 2013, coverage has been prudent, staying below 60%, denoting healthy, sustainable dividend practices. A lower coverage ratio in some years (e.g., 2021's 18.28%) could raise flags but hasn't undermined overall strong dividend support from earnings.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow means the company generates sufficient cash to comfortably pay its dividends. It ensures financial stability.

Intercontinental Exchange (ICE) has shown a significant improvement in its free cash flow over the years, starting from $20.31 million in 2003 to over $3.05 billion in 2023. This consistent growth in free cash flow indicates robust operational efficiency and an ability to generate substantial cash. Simultaneously, ICE's dividend payout commenced in 2008 with $3.45 million and has since risen to $955 million in 2023. The key ratio of 'Dividend covered by Cashflow' has steadily improved over time, indicating stronger dividend coverage by free cash flow. Starting from 1.06% coverage in 2008, this ratio has climbed to 31.28% in 2023. This trend demonstrates that ICE not only has sufficient cash flow to meet its dividend obligations but also has been enhancing its coverage ratio, signifying a healthy financial position and sustainable dividend practices.

Stable Dividends Since the Company Began Paying Dividends?

Stable dividends over the past 20 years mean that the dividend payments did not drop significantly over time, which is important for maintaining investor confidence and providing consistent returns to shareholders.

Analyzing the provided data for Intercontinental Exchange (ICE) from 2003 to 2023, there are a few critical takeaways. Until 2013, ICE did not issue any dividends. Starting in 2013, they began with a dividend per share of $0.13, increasing progressively, peaking at $1.68 per share in 2023. Throughout these two decades, the company's dividends per share never dropped by more than 20% year-over-year. For instance, in 2018, the dividend was $0.96, slightly dipping to $1.1 in 2019 and continuing to rise afterward. In a span of 7 years from 2013 to 2023, the dividend showed consistent increase with no observed substantial dips. This trend is highly favorable as it underscores the company's strength, financial stability, and commitment to rewarding its shareholders. Stability in dividends provides income-seeking investors with a reliable and predictable source of income, reinforcing investor confidence in ICE’s financial health and long-term business prospects.

Dividends Paid for Over 25 Years?

This analysis examines whether Intercontinental Exchange (ICE) has consistently paid dividends over the past 25 years, which serves as an indicator of financial stability and a shareholder-friendly policy.

The data show that Intercontinental Exchange (ICE) does not meet the criterion of paying dividends for over 25 years. From 2000 to 2013, no dividends were disbursed. The company started paying dividends in 2014, beginning with $0.13 per share, and there has been a generally increasing trend since then, reaching $1.68 per share in 2023. While the upward trend is promising, the company has only established a 10-year history of dividend payments, falling short of the 25-year mark. Hence, this trend is not favorable in the context of long-term dividend reliability.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases indicate a company's commitment to returning value to shareholders and can signal strong financial health.

Intercontinental Exchange (ICE) has shown a pattern of reliable stock repurchases over the past 20 years. Specifically, the company repurchased shares in the years 2004, 2011, 2012, 2015, 2017, 2018, 2019, 2020, and 2022. The average share repurchases over this period is approximately 4.1779%. This trend suggests that ICE is committed to enhancing shareholder value by buying back shares, which can be a positive sign for investors. Additionally, frequent repurchases indicate that the company has sufficient capital and believes its stock is undervalued at various points in time, signaling financial stability and confidence in its prospects.