The McGraw-Hill Companies, Inc. (MHP) provides various information services for the financial, education, and business information markets worldwide. It operates in four segments: Standard & Poor’s (S&P), McGraw-Hill Financial, McGraw-Hill Education (MHE), and McGraw-Hill Information & Media (I&M). The company is a dividend champion which has increased distributions for 38 years in a row. The most recent dividend increase was in January, when the Board of Directors approved a 6.40% increase to 25 cents/share. The major competitors of McGraw-Hill include Pearson (PSO), Moody’s (MCO) and Meredith Corp (MDP).
Over the past decade this dividend stock has delivered an annualized total return of 4.20% to its loyal shareholders.
The company has managed to deliver an impressive increase in EPS of 7.50% per year since 2001. Analysts expect McGraw-Hill to earn $2.86 per share in 2011 and $3.12 per share in 2012. This would be a nice increase from the $2.65/share the company earned in 2010. The company has managed to decrease the number of shares outstanding by 2.70% per year over the past decade through share buybacks, which has aided earnings growth.
The company’s high return on equity has doubled over the past decade to 40%. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.
The annual dividend payment has increased by 11.90% per year since 2001, which is higher than the growth in EPS.
A 12% growth in distributions translates into the dividend payment doubling every 6 years. If we look at historical data, going as far back as 1989, we see that McGraw-Hill has actually managed to double its dividend every eleven years on average.
Over the past decade the dividend payout ratio has remained below 40% for a majority of the time with the exception of a brief period in 2001. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
Currently McGraw-Hill is trading at 14.40 times earnings, yields 2.60% and has a sustainable dividend payout. The stock meets my entry criteria, and I will look forward to adding to my existing position in it.
Full Disclosure: Long MHP
- Kimberly-Clark (KMB) Dividend Stock Analysis
- PepsiCo (PEP) Dividend Stock Analysis
- Johnson & Johnson (JNJ) Dividend Stock Analysis
- Chevron Corporation (CVX) Dividend Stock Analysis
One of the advantages of being a dividend investor is that I invest in businesses that meet a certain qualitative and quantitative criteria...
I like to invest in quality companies, with an established track record of dividend increases. I want to acquire these quality companies at ...
This guest post has been written by Mike McNeil, passionate investor, founder of Dividend Stocks Rock and author of The Dividend Guy Blog ...
A dividend king is a company that has managed to increase dividends every single year for at least 50 years in a row. There are only 20 com...
Another year has passed here in dividend growth investing land. This was a year with a lot of changes for me. It is time to evaluate what ha...
Today marks the ninth birthday of the Dividend Growth Investor blog. It is unreal that I have managed to keep this up for 9 years in a row. ...
I wanted to thank you all for reading the Dividend Growth Investor website. This site is a result of my efforts to improve my investing over...
CVS Health Corporation (CVS), together with its subsidiaries, provides integrated pharmacy health care services. It operates through Pharmac...
Medtronic, Inc. (MDT) manufactures and sells device-based medical therapies worldwide. This dividend champion has paid dividends since 1977...
The J. M. Smucker Company (SJM) engages in manufacturing and marketing branded food products primarily in the United States, Canada, and int...