Yahoo Finance We Wouldn't Be Too Quick To Buy Intercontinental Exchange, Inc. (NYSE:ICE) Before It Goes Ex-Dividend
Intercontinental Exchange, Inc. (NYSE:ICE) is about to trade ex-dividend in the next 4 days. The ex-dividend date is one business day before a company's record date, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase Intercontinental Exchange's shares on or after the 14th of September will not receive the dividend, which will be paid on the 29th of September.
The company's next dividend payment will be US$0.42 per share, and in the last 12 months, the company paid a total of US$1.68 per share. Based on the last year's worth of payments, Intercontinental Exchange has a trailing yield of 1.5% on the current stock price of $114.96. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for Intercontinental Exchange
If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Intercontinental Exchange paid out 53% of its earnings to investors last year, a normal payout level for most businesses.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
When earnings decline, dividend companies become much harder to analyse and own safely. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. Intercontinental Exchange's earnings per share have fallen at approximately 6.8% a year over the previous five years. Such a sharp decline casts doubt on the future sustainability of the dividend.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Intercontinental Exchange has delivered 14% dividend growth per year on average over the past nine years. Growing the dividend payout ratio while earnings are declining can deliver nice returns for a while, but it's always worth checking for when the company can't increase the payout ratio any more - because then the music stops.
To Sum It Up
From a dividend perspective, should investors buy or avoid Intercontinental Exchange? Earnings per share have been declining and the company is paying out more than half its profits to shareholders; not an enticing combination. All things considered, we're not optimistic about its dividend prospects, and would be inclined to leave it on the shelf for now.
Although, if you're still interested in Intercontinental Exchange and want to know more, you'll find it very useful to know what risks this stock faces. Our analysis shows 2 warning signs for Intercontinental Exchange and you should be aware of them before buying any shares.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield 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.
