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
The goal of every dividend investor is to generate dividend income that is larger than their annual expenses. This coveted goal is called th...
Dividend growth stocks are the gift that keeps on giving . I like the fact that most of the work in selecting good dividend growth stocks is...
I have been a dividend growth investor for over 7-8 years now. The reason why I have somewhere between 85% - 90% of my networth in dividend ...
As a dividend investor, my main goal is to attain financial independence when dividend income exceeds expenses by an adequate margin of saf...
I love it when the stock market goes on sale, like it has been so far in the past two - three weeks. For aspiring dividend growth investors,...
How do you define success? To me, success is the freedom to do my own thing, and the ability to reach my goals. Given the fact that I am a f...
There are many risks to investing . One of the major risks that could ruin a portfolio’s chances of generating adequate dividends are p...
One of the biggest sins in investing, is investing money without a clear plan or strategy to accomplish specific goals . This investing sin...
Before I begin my message, I wanted to wish all my readers a Happy 4th of July. And I wanted to thank all of those military members for keep...
I am a fan of diversification as a tool to reduce risk. I diversify by buying at least 30 – 40 securities, representative of as many sectors...