Intercontinental Exchange, As A Dividend Growth Investing Target


  • In this article, I discuss what is dividend growth investing and how to practice it. I use Intercontinental as an example to explain how to analyze a DGI prospect.
  • Intercontinental is a wide-moat, fast-growing dividend payor, thus qualifying as a DGI target.
  • In the next 20 years, a shareholder will collect $164 in dividends, pocket multi-bagger capital appreciation, and reap a dividend yield-to-cost as high as 24%.
  • If the position is established on a major market swoon, that yield-to-cost can be had much sooner.
  • Looking for more investing ideas like this one? Get them exclusively at The Natural Resources Hub. Get started today »

Intercontinental Exchange, As A Dividend Growth Investing Target

Lately, I came across quite a few readers who either asked or should have asked about dividend investing in general, and dividend growth investing in specific.

In this article, I use Intercontinental Exchange, Inc. (NYSE:ICE) as an example to answer various questions that have been asked about dividends.

Dividend investing strategies

Dividend metrics

All income investors know to check the dividend yield before opening a position. Most income investors know to ensure dividend safety in terms of the payout ratio before building a position. Some income investors know to assess the dividend growth rate before having a high conviction to a dividend idea.

These concepts come together in the so-called Gordon growth model, which states:

It follows

In other words, the implied rate of return of an income investment is determined by the sum of the forward dividend yield and dividend growth rate, under the condition that the underlying business is in stable, secular growth going forward.

For the above equation, there are two basic strategies to maximize the expected rate of return:

  1. The high-yield approach, i.e., to max out the dividend yield while maintaining the business at the status quo. The majority of the earnings is paid out to the shareholders in the form of dividends (hence a high dividend yield); or
  2. The high-growth approach, i.e., to keep dividend payout at a relatively low level so that the majority of the earnings can be reinvested to drive growth. As earnings grow, dividends will follow suit, even if the payout is kept at a constant level (Fig. 1).

There are plenty of dividend-paying companies that choose the middle ground between these two end-member strategies. As we can see in Fig. 1, among the 139 so-called U.S. dividend champions, most indeed chose the middle ground and they average 10.34% in the

Intercontinental is just one of the many DGI ideas recommended by Laurentian Research. In addition to three investment strategies for capital appreciation, he manages a DGI strategy that currently yields ~11%.

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This article was written by

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The best energy and mining stock ideas with multibagger potential

As a natural resources industry expert with years of successful investing experience, I conduct in-depth research to generate alpha-rich, low-risk ideas for the member of The Natural Resources Hub (TNRH). I focus on identifying high-quality deep values in the natural resources sector and undervalued wide-moat businesses, an investment approach that has proven to be extremely rewarding over the years.

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Disclosure: Besides myself, TNRH is fortunate enough to have multiple other contributing authors who post articles for and share their views with our thriving community. These authors include Silver Coast Research, ..., among others. I'd like to emphasize that the articles contributed by these authors are the product of their respective independent research and analysis.

Disclosure: I am/we are long ICE, CASS, VRSK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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