A 4% Yield on the Verge of an Upgrade

Wealthy Retirement View in Browser Brought to you by The Oxford Club Wednesday, October 21, 2015 "Should we stash cash?" Multi-millionaire publisher Bill Bonner answers... Recently on network television, multi-millionaire President of Agora Inc. was asked: Is it time for Americans to stash cash? His answer may surprise you. But he also gives SPECIFIC DETAILS on how he's protecting his own wealth from increasingly hostile U.S. policies. With many states now trying to ban cash, his insights are more important than ever. Read more... The Safety Net: A 4% Yield on the Verge of an Upgrade Marc Lichtenfeld, Chief Income Strategist, The Oxford Club CME Group (Nasdaq: CME), formerly known as the Chicago Mercantile Exchange, was founded in 1898 as the Chicago Butter and Egg Board. Today, it owns and operates marketplaces for the trading of derivatives, including the CME, CBOT, NYMEX and COMEX. The business has changed radically over the past 10 years as many traders have moved off the trading floor to electronic trading. Over the past 12 months, the company has generated $1.3 billion in free cash flow. It has paid out $1.3 billion in dividends. A 100% payout ratio concerns me. If you look up CME Group on Yahoo Finance or any other major financial site, it tells you it pays a $2 per share annual dividend and the yield is somewhere in the 2% range. But that's not entirely accurate. The company currently pays a $0.50 quarterly dividend. It also pays a special dividend in December. That special dividend has ranged from $1 per share in 2008, when it began paying it, to $2.60 per share in 2013. Last year, the special dividend was $2. Based on free cash flow this year, I expect the company to pay shareholders another $2 in December. If so, the yield is not 2.2%, but 3.9%. "Demand is inevitably going to exceed the available spectrum..." There's a serious epidemic spreading across America right now. It involves the massive explosion in Wi-Fi usage. Computerworld confirms that "wireless networks are edging near capacity, not just in the United States, but all over the world." And according to The New York Times, "the lifeblood of this innovative sector of the economy is at risk of being choked off." But there's one invention that could solve this problem - and make hundreds of people very rich. Find out what it is here. CME's dividend safety gets penalized for the high payout ratio. It pays out all of its free cash flow in dividends. So if cash flow goes lower, while it may not cut the quarterly dividend, the special dividend may be reduced. CME also hasn't had much cash flow growth over the last several years. Generally speaking, I want to see free cash flow steadily climb in order to ensure the dividend is safe and to increase the likelihood of a dividend boost. Over the past four years, free cash flow went nowhere, starting to rise only this year. It is projected to grow nearly 13% next year. Should cash flow grow as expected, CME will either boost the dividend or give itself a little more breathing room. But since those 2015 and 2016 figures are only estimates, we have to go with the historical data, which is not particularly impressive. Because of the historically flat to negative free cash flow and the extremely high payout ratio, the dividend cannot be considered very safe. That being said, should CME Group grow its cash flow, I expect the stock will be upgraded in the future. Dividend Safety Rating: D If you have a stock whose dividend safety rating you'd like me to analyze, leave the ticker symbol in the comments section below. And be sure to try out SafetyNet Pro to see the dividend safety ratings of your favorite stocks. Hoping your longs go up and your shorts go down, Marc Click here to post a comment on WealthyRetirement.com THIS COULD BRING $0.58 A GALLON GAS TO THE U.S. This catalyst converts one of the Earth's most abundant energy sources into gasoline. It's not petroleum, solar, hydro, wind, corn, algae or anything else you are probably thinking. And soon it will fuel 10 million U.S. vehicles... For as little as $0.58 a gallon! Recent Articles From Wealthy Retirement The States to the Rescue: How the Boomers' Lack of Savings Has Become a Public Problem by Steve McDonald Tuesday, October 20, 2015 The retirement savings numbers for boomers are horrendous. And for both state and federal governments, it is another unfunded liability they can't handle. Read On... Supermarket Sweep: No COLA May Be Hard for Retirees to Swallow by Kristin Haugk Monday, October 19, 2015 I don't know about you, but the prices I pay at the grocery store have been skyrocketing. At the same time, the sizes of the portions I receive have dwindled. Read On... Have Some Sense: The Dangers of Blindly Following a Hot Trend by Steve McDonald Friday, October 16, 2015 Some folks seem to have more money than sense, especially when it comes to city real estate. Read On... You are receiving this email because you subscribed to Wealthy Retirement. To unsubscribe from Wealthy Retirement, click here. To cancel by mail or for any other subscription issues, write us at: Wealthy Retirement Attn: Member Services 105 West Monument Street, Baltimore, MD 21201 Keep the emails you value from falling into your spam folder. Whitelist Wealthy Retirement. 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