Should You Buy This Dividend King After Its Beat-and-Raise Quarter?

Dividend Kings are companies with a proven track record of increasing their dividend payouts for at least 50 consecutive years. They are known for their financial stability, strong business models, and commitment to shareholder returns. As such, the stocks of these companies tend to attract a steady audience of investors seeking passive income and stability in their portfolios.

Notably, one such “Dividend King” that has grabbed the attention of Wall Street is S&P Global (SPGI). The market intelligence leader's results for the latest quarter were impressive, and the company also offered bullish guidance for the current quarter, further bolstering the bullish expectations around this “market critical” stock.

About S&P Global

While S&P Global (SPGI) as a unified entity was formed in 2008, its roots trace back much earlier. The company's heritage is intertwined with several legacy data, publishing, and analysis organizations, including Standard & Poor's, founded in 1860, and McGraw Hill, established in 1888. These laid the foundation for what would become S&P Global, parent company of everything from the S&P 500 Index ($SPX) to S&P Credit Ratings.

In its current iteration, SPGI is a leading provider of essential market intelligence, while offering a wide range of services including credit ratings, indices and benchmarks, market insights and analyses, and Platts commodities data.

Valued at a market cap of $151 billion, SPGI stock is up 10.3% on a YTD basis, and more than 40% over the past year. 

Additionally, the stock pays a quarterly dividend of $0.91, backed by a half-century of consistent growth. With SPGI trading less than 10% from all-time highs, the yield of 0.75% isn't the most generous, but the payout is well-covered at a ratio of 24% - leaving plenty of room for continued increases.

SPGI's Consistent Results

S&P Global's preeminent position in the credit rating and market intelligence industry has led to the company reporting solid earnings and revenue growth over the years. Over the past 10 years, the company's revenue and earnings have clocked CAGRs of 10.73% and 14.69%, respectively.

More recently, SPGI's Q3 results beat estimates on both revenue and earnings. In Q3 2024, the company reported revenues of $3.575 billion, up 16% compared to the previous year. All of the key segments, such as ratings (+35% YoY), commodity insights (+9% YoY), indices (+17.5% YoY), and mobility (8.7% YoY), showed strong growth year over year.

Q3 EPS rose by 21% to $3.89, coming in ahead of the consensus estimate of $3.64. Over the past 16 quarters, the company's EPS has topped expectations 12 times.

Moreover, the company increased its cash flow from operations. For the nine months ended Sept. 30, S&P Global's cash flow from operating activities was at about $4 billion, up from $2.4 billion in the year-ago period. For the full year, SPGI raised its adjusted free cash flow guidance to approximately $5.2 billion.

Additionally, S&P Global raised its guidance for full-year adjusted EPS to a range of $15.10-$15.30 against its prior guidance of $14.35-$14.60. Also, 2024 revenue growth guidance was raised to 11.5%-12.5% from its prior view of 8.0%-10.0%.

Overall, analysts are expecting forward revenue and earnings growth rates of 7.94% and 8.20% for the company which is higher than the sector medians of 5.50% and 3.50%, respectively.

Competitive Advantages

S&P Global’s Ratings segment is among the world’s largest credit rating agencies, with over a century of experience and more than a million outstanding ratings across 150+ countries. This global presence reduces reliance on any single market and makes the company’s services valuable in both recessionary and growth periods, highlighting its non-cyclical nature. Notably, 95% of the top 20 global institutional investors use S&P Global ratings, further solidifying its industry leadership.

In May 2024, S&P Global acquired Visible Alpha, a leading provider of consensus data critical for Capital IQ Pro, the company’s Market Intelligence platform. Visible Alpha aggregates consensus from more than 200 investment banks and research firms and leverages insights from over 6,000 analyst models. This addition significantly enhances S&P’s data offerings, benefiting clients who rely on robust and diverse data sources.

S&P Global’s ongoing artificial intelligence (AI) initiatives are also noteworthy. The company recently launched new generative AI-driven tools, including transcript search and news sentiment features on Capital IQ Pro, as well as an AI-powered chatbot on the Platts Connect platform within Commodity Insights. These advancements align with a growing trend toward AI-driven data processing and decision support, making S&P’s platforms more valuable to clients seeking real-time, AI-enhanced insights.

Additionally, S&P Global is optimizing operations through cost-cutting measures, including headcount reduction and efficiency initiatives. This phase is expected to improve margins further and position S&P Global as a primary or single-source vendor for clients, thanks to its expansive product suite across various sectors, solidifying its value as a comprehensive financial data provider.

Is SPGI Stock a Buy?

Analysts think the outperforming Dividend King can keep climbing, and have deemed SPGI stock a “Strong Buy” overall. Out of 20 analysts covering the stock, 17 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating, and 1 has a “Hold” rating.

The stock's mean target price is $582.24, which denotes an expected upside potential of nearly 20% from current levels.