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Thursday June 21, 2012
CME Group: A 'split' decision
by Neil Macneale, editor 2-for-1 Stock Split Newsletter Our model portfolio is based on buying stocks that have announced upcoming splits.Among those that announced splits in May, CME Group (CME) is at the top of our ranking system. Stock buybacks and dividend increases are becoming more frequent as companies look for ways to use their cash and keep their shareholders happy. Stock splits are often lumped in with these types of corporate actions, but they are really quite different because they don’t actually cost anything from the company treasury. Instead of having to put out cash, when a Board of Directors announces a stock split, it puts its own collective confidence in the future on the line. I think it’s for this reason we aren’t yet seeing much of an increase in the number of split announcements. Apparently, confidence is harder to build up than a cash hoard. Meanwhile, CME certainly caught our attention with its 5 to 1 split announcement in late May. The company runs the Chicago Board of Trade, the Globex electronic trading system, and provides clearing and settlement services for exchange-traded contracts. It has a PE of 11.1 and, according to Reuters, is selling for less than its book value. The 3.3% dividend is attractive and the Beta of 1.1 is only slightly higher than that of the overall market. We have only one bank in the portfolio at the moment; it’s time to add another position from the financial sector. Buy CME. Learn more about this financial newsletter at Neil Macneale's 2-for-1 Stock Split Newsletter. Related articles: 
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