With the market in turmoil, investors are flocking to dividend-paying stocks in 2022. However, even companies that pay dividends haven't been exempt from some pain. Share prices of derivatives marketplace leader CME Group (CME -1.93%) are down nearly 20% this year, only slightly beating the just over 20% decline for the S&P 500 index.

Nevertheless, a solid and rising dividend payment can go a long way toward smoothing out bumps in the road as well as providing lucrative returns over the long term. Is CME worth a buy right now?

Derivative volumes (almost) always go up

Derivatives (mysterious financial contracts like futures and options) tend to get a bad rap, especially considering that misuse of them contributed to the financial crisis of 2008-09. However, derivatives have been a useful tool for centuries, helping businesses manage their financial risk and navigate tricky economic environments. CME Group is one of the largest marketplaces for these instruments out there. It provides futures and options on everything from agricultural products and base materials to currencies and stock indices.  

As global financial markets gradually increase in value over time, the volume of derivatives traded by market participants also rises. As companies like CME essentially act as tollbooths -- taking a small fee per transaction, as well as providing access to economic and business data to customers -- they offer stable growth over the long term. In fact, even in uncertain times, CME is quite resilient. When commodity, bond, and stock markets go haywire (as they have in 2022), investing institutions and traders can actually ratchet up their use of derivatives to try to help mitigate losses.  

To wit, CME reported its third-highest quarterly derivatives volume on its marketplace in Q2 2022. This led to a small but healthy 5% year-over-year increase in revenue to $1.24 billion (its record-high revenue came in early 2020 when the onset of the pandemic led to a spike in hedging using derivatives contracts). Because CME is a mature and well-established business, any new revenue tends to generate little in the way of new expenses. Thus, net income grew at a far faster pace than revenue, increasing 28% to $654 million in Q2.

Through the first half of 2022, CME's revenue and net income are up a respective 6% and 25% year over year.  

A superstar dividend payment

A company that is able to crank out high and rising amounts of profit is exactly what a dividend-income investor needs to look for. CME checks off a lot of boxes here. Through various types of economic environments, CME has managed to gradually raise its free cash flow for years. As a result, this has been a steady quarterly dividend payer and dividend pay increaser for coming up on two decades now.

But there's a deal sweetener with CME: Starting in 2012, the company started paying a once-a-year variable dividend. The amount paid per share is determined based on how profitable operations have been, but this payout has also risen steadily over the last decade. The amount of this payout is usually announced late in the year and paid in January in addition to the quarterly dividend.  

For 2021, CME Group paid out $3.60 per share in quarterly dividends, plus a $3.25 per share special annual dividend in January 2022. For 2022, the quarterly pay has been increased to $1 per share (or $4 for the whole year), though the special dividend hasn't yet been revealed. Currently, just the quarterly payout for 2022 represents a 2.2% annualized yield. Any annual variable dividend (which would be paid in January 2023) would be in addition to this.  

Is this income stock a buy?

CME stock currently trades for 26 times enterprise value to free cash flow. It's a premium price tag, but a price tag that has stuck with this company for years given its lucrative payout to shareholders. A rising dividend can be a top way to generate investment returns over the long term, providing a second source of compounding growth in addition to stock price performance. If income-generating stocks are your game -- and especially if you plan on reinvesting those dividends each quarter -- give CME Group a look.