Intercontinental Exchange: A Consistent Dividend Growth Performer

Summary

• Intercontinental Exchange had a great 2020, posting record revenues and profits once again.
• The company's capital returns remain strong, with the most recent dividend hike at a fabulous rate of 10%.
• All three of Intercontinental's segments enjoy favorable growth catalysts ahead. We are estimating annualized returns in the low double-digits in the medium term.

In December, we covered Intercontinental Exchange (NYSE:ICE), going through the company's ability to benefit from corrections in the market amid increased trading volumes. Additionally, we praised the stock's capacity to keep on generating wealth creation for decades to come due to the oligopolistic nature of the industry, which stresses almost unbreakable barriers to entry.

Over these past three months, shares have remained mostly flat. However, the company posted an excellent Q4 and raised its dividend once again at a double-digit rate.

Source: Google Finance

As a result, we are reassessing our expected returns future annualized returns, which were in the range of 9-10% in our previous report. Before we get there, however, let's assess the company's recent performance.

Recent performance

Intercontinental's whole performance is the result of its three sub-segments. These are the Exchanges, the Fixed Income and Data Services, and the Mortgage Technology segment.

Exchanges segment:

We love Intercontinental's Exchange division because it benefits significantly when there is increased volatility (and uncertainty) in the market, producing growing revenues during adverse economic times. As the bar chart displays, during Q1-2020, for example, the company saw its brent traded derivatives volumes spike by around 70% in the midst of the pandemic's eruption.

Source: Pro Forma Financials, Author

The company's flagship Brent crude oil contracts serve as the foundation of a global oil network that today comprises more than 600 related crude and refined oil products, including locational and refined spreads.

By consistently investing in the structural growth opportunities that exist across the global energy markets, Intercontinental has grown its energy revenues by a CAGR (compound annual growth rate) of 7% over the past 6 years. Intercontinental actually saw accelerated YoY growth during 2020 to 13% amid increased trading volumes. One such example of expanding its trading network continuously is Intercontinental's upcoming

Analyst’s Disclosure:I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.