Historically, dividend stocks have proved to be better long-term investments than stocks with no payout when comparing total returns. They also provide a bit more safety because investors will receive their dividends regardless of how their stock prices perform. Or at least that's the plan.
Part of being a good dividend stock isn't just offering a decent yield; it's also about offering a sustainable and reliable dividend. A great dividend that's unsustainable can be counterproductive.
For investors looking for safe and consistent income, S&P Global (SPGI 0.07%) can be a good go-to. The company has increased its annual dividend for 50 consecutive years. Over that time, it's managed to raise it through seven recessions. Not a bad track record.
A multifaceted financial business with limited competition
S&P Global is a financial institution that provides financial information, investment expertise, and all-around business analytics. It has five divisions:
- Market Intelligence
- Ratings
- Commodity Insights
- Mobility
- S&P Dow Jones Indexes
The company's market intelligence and commodity insights divisions do research and provide data and analytics to businesses about industry trends, risks, and opportunities. This information is valuable to almost any company, but especially for investment banks and money managers that need to be well informed when making decisions.
S&P Global's ratings division is what it's best known for. The company provides corporate credit ratings for public and private companies. This helps consumers and businesses know the perceived risk of investing in the debt of particular companies.
Similar to market intelligence and commodity insights, the company's mobility division focuses on providing insights and data with a focus on the auto and related industries.
S&P Global also owns the most popular stock market index (and arguably the most important one), the S&P 500. It tracks 500 of the most valuable public companies in the U.S. by market cap. It has become the benchmark for the stock market, with professional money managers using its returns to judge their own funds' performances. Various financial institutions license the right to assemble funds that mirror the S&P 500.
S&P Global's divisions pull their own weight
A key part of S&P Global's longevity is its diverse revenue streams. That ensures the company isn't too vulnerable during economic downturns and recessions if one division is hit hard. In the second quarter, S&P Global had just over $3.1 billion in revenue, up 4% year over year. Here's how it breaks down by division:
| Division | Q2 2023 Revenue | YoY Revenue Increase | Percentage of S&P Global's Q2 Revenue |
|---|---|---|---|
| Market intelligence | $1.079 billion | 6% | 35% |
| Ratings | $851 million | 7% | 27% |
| Commodity insights | $462 million | 8% | 15% |
| Mobility | $369 million | 10% | 12% |
| S&P Dow Jones indexes | $347 million | 3% | 11% |
Data source: S&P Global, rounded to the nearest whole percent; YoY = year over year.
It's one thing to have multiple divisions bringing in their fair share of revenue; it's another thing to have a commanding market position in those divisions. S&P Global has the latter.
Revenue growth might have slowed from previous years, but the fact that S&P Global still increased revenue across all divisions shows the demand for its services remains steady despite the economic uncertainty of the past year and a half or so.
Credit ratings, market intelligence, insights, and services are in demand regardless of market or economic conditions. Wall Street, banks, and businesses of all types rely on S&P Global to make informed decisions -- and that reliance doesn't suddenly stop because the economy has slowed. If anything, that's the time to embrace its services even more.
The financials help ensure the dividend will remain safe
A great way to determine the safety of a company's dividend is by looking at its dividend payout ratio, which tells you how much of its earnings it pays out to shareholders. S&P Global's current dividend payout ratio is just over 48%, leaving the company enough capital to continue reinvesting in the business and ensuring continued growth.
S&P Global's quarterly dividend is $0.90 per share with a yield of about 0.92%. Despite any short-term problems the company might face, the security of its dividend is evident.
