This Wide-Moat Stock Pumps Up the Volume on Dividends

Gaston Ceron: So, we’re talking today about CME Group. It’s a company based right here in Chicago. It's a derivatives exchange. They specialize in futures. They trade a wide variety of products. For example, they are big in the trading of interest-rate derivative products. And here, one of the key things that we look at when we follow this company is volume. If volume is up, generally it’s good for the exchange; if volume is down, generally it's not so good.

So, for instance, when it comes to interest-rate products, if it's a period of time when people are speculating a lot about the path of interest rates, that’s generally good for volatility and good for volume. Other product classes include things like energy, derivatives or foreign exchange or commodities.

It's a wide-moat name here at Morningstar. We think it is wide-moat because futures exchanges typically have a greater degree of exclusivity around their product set than other exchanges that specialize in more commodified asset classes like equities. So, therefore, because it has more protection around its profits, we think CME is wide-moat.

I think that one thing that’s unique about the company and fairly interesting is that it is a dividend payer. Its regular quarterly dividend is yielding about 2.65% right now, but on top of that the company, every year, regularly considers an additional fifth special dividend, which can turn into a nice additional payout for shareholders. This past year, for instance, that amounted to $2.60. It wouldn't always be that high; sometimes it could be higher or lower depending on how much excess cash they have on the books. We think this additional feature of a fifth dividend is something that is relatively unique to CME, and we think that it’s something that perhaps might appeal to investors who are dividend-focused.