Yahoo Finance CME Group (NASDAQ:CME) Could Be A Buy For Its Upcoming Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that CME Group Inc. (NASDAQ:CME) is about to go ex-dividend in just four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is important because any transaction on a stock needs to have been settled before the record date in order to be eligible for a dividend. Meaning, you will need to purchase CME Group's shares before the 7th of June to receive the dividend, which will be paid on the 25th of June.
The company's next dividend payment will be US$1.15 per share, on the back of last year when the company paid a total of US$9.85 to shareholders. Based on the last year's worth of payments, CME Group stock has a trailing yield of around 4.9% on the current share price of US$202.98. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether CME Group can afford its dividend, and if the dividend could grow.
Check out our latest analysis for CME Group
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. CME Group paid out 51% of its earnings to investors last year, a normal payout level for most businesses.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. With that in mind, we're encouraged by the steady growth at CME Group, with earnings per share up 8.9% on average over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Since the start of our data, 10 years ago, CME Group has lifted its dividend by approximately 19% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.
Final Takeaway
Is CME Group worth buying for its dividend? CME Group has been generating some growth in earnings per share while paying out more than half of its earnings to shareholders in the form of dividends. It doesn't appear an outstanding opportunity, but could be worth a closer look.
So if you want to do more digging on CME Group, you'll find it worthwhile knowing the risks that this stock faces. Case in point: We've spotted 2 warning signs for CME Group you should be aware of.
If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
