If you believe in the economic recovery as much as I do, you may want to think about investing in one of the exchanges. A better economy means people make more money and invest more, giving more business to the exchanges that facilitate investment.
There are several ways to go with this, but my personal favorite is CME Group Inc (NASDAQ:CME), the world’s largest futures exchange. Not only is CME Group Inc (NASDAQ:CME) the leader in one of the fastest-growing areas of investing, but the stock also pays a very nice yield of around 3%, which should only increase going forward.
About CME Group Inc (NASDAQ:CME)
As mentioned, CME Group Inc (NASDAQ:CME) is the largest futures exchange in the world, operating on both its CME Group Inc (NASDAQ:CME) Globex trading platform and on its trading floors. To illustrate how futures trading has grown, consider CME Group Inc (NASDAQ:CME)’s revenues over the past decade:
One of CME’s biggest competitive advantages is that it operates its own clearing house, which allows the company to get revenue from the trades themselves and the clearing of those trades. Expanding its clearing services should be one of the major drivers of growth going forward.
CME derives 81% of its revenues from fees associated with the trading of the futures and options-on-futures it offers. Over 87% of the company’s trades are conducted electronically through its Globex platform, and fees are based on the product being traded, how the trade was done, and whether or not the customer conducting the trade is a member of the exchange
Growth and Valuation
CME Group looks to be highly valued at first glance, trading for 18.9 times forward earnings. However, 2013’s projected earnings of $3.16 per share are expected to grow quickly to $3.64 and $4.08 over the next two years, for annual earnings growth of 15.2% and 12.1%, respectively, which more than justifies the valuation. Also worth considering is the company’s very competitive 3% dividend yield, which has been raised consistently and rapidly over the past decade from just 13 cents per share in 2003 to $1.80 per share today. If trading activity continues to pick up, I see no reason why this trend shouldn’t continue in the years ahead.