We are counting down the Top Dividend Growth Stocks — and here’s the auspicious #8: MarketAxess (MKTX). A behind the scenes company with spectacular growth, MarketAxess runs an electronic trading platform for corporate bonds and other types of fixed-income instruments worldwide.
MarketAxess Holdings Inc (MKTX) is Fully Certified, passing ALL Dividend System criteria. It has ‘Premier’ status being in the upper percentiles of this month’s stock universe. The company increased dividends for 11 years, making it a Dividend Contender 10+. We consider MKTX to be a Growth stock.
GROWTH: MKTX’s 5-year average dividend growth rate is 26.6%, wonderfully high versus the dividend universe average of 12.4%. Free cash flow has grown at an average rate of 20.5% per year for the last 5 years versus the dividend universe at 8.3%, so MKTX is performing very well.
INCOME: MKTX’s current dividend yield is .42%, less than half of the average at 2.65%.
SAFETY: We use the Dividend Coverage Ratio to measure the dividend’s safety – higher is better. MKTX has a DCR of 2.6 which is good, exceeds the minimum requirement of 2.
VALUATION: The price at time of analysis was $571.66, which we consider Overpriced. A fair price based on historical PE ratio and earnings would be around $319.57. The S&P500’s average PE ratio is 38.42, versus MKTX’s PE ratio of 72.49, 50% or higher than the S&P 500 average PE. Our ‘Value Rating’ for MarketAxess Holdings Inc is .5 out of 5.0, meaning that both PS and PE indicate the stock is very expensive, compared to other dividend stocks available.
TIMING: Historical Yield and PE tell us that MKTX has ‘No ‘buy’ signal.’ Don’t eliminate a stock based on one factor (or lack thereof).
QUALITY: Our quality formula gives MKTX a ‘Quality Rating’ of 4.3 (out of 5), versus the average of 2.7 for this month’s dividend universe.
TOTAL RETURN: Over the last 15 years, the compound annual growth rate for an investment in MarketAxess Holdings Inc was 25.56% per year with dividends reinvested, versus the S&P500 Total Return of around 11% per year for the same time period. As you can see, MKTX is doing better than the market with dividends reinvested.
Compared to all dividend stocks paying 7 years or more of increasing dividends, we rate MarketAxess Holdings Inc a ‘A+.’
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