Key Points
- S&P Global has raised its dividend for 54 consecutive years.
- The stock has outperformed the broader market over the last three decades.
- The company holds a dominant position in the credit ratings business and boasts stellar operating margins.
Dividend stocks represent an excellent source of passive income and offer additional benefits. According to research from Hartford Funds, companies that consistently raise their annual dividend payouts tend to outperform those that do not, with lower volatility. The underlying rationale is straightforward: organizations with extended track records of dividend increases typically operate stable businesses, maintain strong capital management practices, and demonstrate a commitment to rewarding shareholders.
Fewer than 30 companies in the S&P 500 have raised their dividends for 50 consecutive years, and S&P Global (NYSE: SPGI) stands among this distinguished group. For 54 consecutive years, S&P Global has grown its annual dividend, delivering consistent value for its investors.
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S&P Global has produced impressive returns for shareholders
S&P Global has established a stellar track record and has been an exceptional compounder for long-term investors. Over the past three decades, the company has delivered annualized returns, including reinvested dividends, exceeding 15%, significantly outperforming the broader S&P 500 index’s 10.4% annualized return over the same period.
Earlier this year, S&P Global stock experienced a decline. In February, the company announced disappointing fourth-quarter results. Additionally, concerns that artificial intelligence would disrupt software stocks weighed on data vendors and software providers, and S&P Global was categorized with this group. However, S&P Global maintains a strong market position and proprietary data that could prove more resilient to AI disruption.
What distinguishes S&P Global as a standout performer is its critical importance to financial markets. The company operates one of the largest credit ratings businesses in the United States, commanding approximately 50% market share. Moody’s, the second-largest credit ratings agency, holds a 31% market share.
Investors can view S&P Global as a toll collector, capturing recurring fees as global debt markets expand, without assuming any credit or market risk itself. Its benchmarks and index products also benefit from the continued growth of financial markets.
Should you buy the dip in S&P Global?
With its asset-light business model, S&P Global boasts stellar operating margins. In the second quarter, its operating margin reached 54%, including 68% in its ratings business and 71% in indexes. Furthermore, debt issuance picked up in the second quarter, with billed issuance increasing 25% year over year. The company also raised its full-year earnings-per-share guidance, alleviating some concerns from earlier in the year.
While the stock has recovered some of its decline, it still trades at 26.4 times earnings, below its recent peak of 56 times earnings and below its 10-year average P/E ratio of 31.8. For investors seeking a quality financial stock with a steadily growing dividend, S&P Global represents a compelling opportunity to buy on the dip.
