6. S&P Global Inc. (NYSE:SPGI)
5-Year Annual Dividend Growth Rate: 11.09%
S&P Global Inc. (NYSE:SPGI) is a New York-based capital market company that mainly provides services in financial information and analytics. The company remained popular among elite funds in the first quarter of 2024 as hedge fund positions in the company jumped to 97, from 82 in the previous quarter, according to Insider Monkey’s database. The stakes held by these hedge funds have a consolidated value of over $9.5 billion.
Establishing a presence in the credit ratings industry is challenging due to regulatory requirements and high barriers to entry. In addition, building a strong reputation and earning the trust of investors takes considerable time. S&P Global Inc. (NYSE:SPGI) currently dominates this industry, benefitting from a strong economic moat that ensures stability and consistent cash flows for the company. Its trailing twelve-month (TTM) free cash flow is approximately $4 billion, significantly outpacing its competitor Moody’s, whose TTM free cash flow amounts to just $2 billion.
Analysts are giving a positive outlook for the credit ratings industry, rebounding from a decline it suffered in 2022. S&P Global Inc. (NYSE:SPGI) finalized a $44 billion all-stock acquisition of IHS Markit that year, significantly broadening its information and analytics capabilities. While this move expanded the company’s market presence, it also impacted the company’s return on invested capital. In addition, the continued hikes in interest rates during this period also put additional pressure on the stock price. However, conditions have begun to improve. In the first quarter of 2024, the company observed the highest level of debt issuance since 2021.
Oppenheimer presented a bullish outlook on the capital markets sector in July. The firm expects the sector to outperform in the coming quarters. The firm maintained a Buy rating on S&P Global Inc. (NYSE:SPGI). On June 24, the company announced that Martina Cheung, currently serving as the president of S&P Global Ratings, will succeed Douglas Peterson as president and CEO, starting November 1, 2024. The stock is up by over 2.2% since the start of 2024.
S&P Global Inc. (NYSE:SPGI) has been growing its dividends for the past 51 years and in the past five years, it has raised its payouts at an annual average rate of over 11%. The company pays a quarterly dividend of $0.91 per share and has a dividend yield of 0.82%, as of July 2.
While we acknowledge the potential of SPGI as an investment, our conviction lies in the belief that deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued dividend stock that is as promising as SPGI but that trades at less than 7 times its earnings and yields nearly 10%, check out our report about the dirt cheap dividend stock.
