Could ASX Ltd (ASX: ASX) be a really solid dividend share idea to consider?
ASX Ltd is the company that operates the Australian Stock Exchange (ASX). The ASX is an integrated exchange offering listings, trading, clearing, settlement, technical and information services, technology, data and other post-trade services.
Could ASX be a really good dividend idea?
ASX has grown its dividend in consecutive years since 2013, including through the difficult year of 2020 when many other ASX dividend shares were cutting their dividends because of COVID-19.
I’m not really interested in dividend shares that cut their dividends when a recession or ‘black swan event’ comes up – that’s precisely when you want your dividends to be the most reliable. We saw dividend cuts from businesses like Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP) and Transurban Group (ASX: TCL).
In FY20 it grew its final dividend by 7.2%, bringing the full year dividend to 238.9 cents which represented an increase of 4.5%.
How did FY20 go?
The company saw 8.6% growth of revenue to $938.4 million. There was growth in listings and issuer services supported by higher secondary raisings. There was an increase in derivatives and OTC markets due to growth in Austraclear. The company said that there was a strong trading services result underpinned by greater cash market trading activity and growing usage of information and technical services. There was also higher equity post-trade services in line with a lift in cash market activity.
EBIT (EBIT explained) grew by 8.5% to $652.2 million, which was the 10th year of consecutive EBIT growth. Statutory profit/earnings per share (EPS) grew by 1.4% to 257.6 cents and underlying EPS went up 4.4% to 265.4 cents.
Is ASX a good dividend pick?
The ASX share price has dropped around 20% since 3 September 2020. That has boosted the dividend yield to 4.7%, when including the franking credits in the yield calculation.
Despite the ASX share price decline, it’s priced at almost 30 times the estimated earnings for the 2021 financial year using CommSec numbers. This is a high price for a business growing at single digits. However, it does have a very strong market position, so I don’t think it’s a bad choice overall.
However, there are plenty of other ASX dividend shares that look cheaper and have more growth potential like Magellan Financial Group Ltd (ASX: MFG) and Brickworks Limited (ASX: BKW).
