What’s behind the Outlook for Nasdaq?

Nasdaq (NDAQ) revenue rose 9% and 8% in 2016 and 9M17, respectively. Its revenues less transaction-based expenses rose 9% and 7% in 2016 and 9M17, respectively. Market Services, Corporate Services, Information Services, and Market Technology drove growth in both periods. The United States and other countries contributed to growth in 2016.

Nasdaq’s operating expenses increased 5% in 2016 before decreasing 2% in 9M17. As a result, operating income rose 17% and 21% in 2016 and 9M17, respectively. Adjusted operating income rose 8% and 9% in 2016 and 9M17, respectively.

Interest expense increased during those periods. There was also an asset impairment charge in 2016. Adjusted net income rose 7% and 17% in 2016 and 9M17, respectively. Adjusted diluted EPS (earnings per share) rose 9% and 16% in 2016 and 9M17, respectively. Share buybacks enhanced its 2016 EPS.

Nasdaq’s dividend per share rose 34% and 21% in 2016 and 2017, respectively. Prices rose 15% and 14% in 2016 and 2017, respectively. That led to an upward rising dividend yield curve. A forward PE (price-to-earnings) ratio of 18.3x and a dividend yield of 2% compare to a sector average forward PE ratio of 33.8x and a dividend yield of 2.9%.

The S&P 500 (SPX-INDEX) (SPY) offers a dividend yield of 2.2%, a PE ratio of 23.4x, and a YTD (year-to-date) return of 19.6%. The Dow Jones Industrial Average (DJIA-INDEX) (DIA) has a dividend yield of 2.2%, a PE ratio of 22.3x, and a YTD return of 25.1%. The NASDAQ Composite (COMP-INDEX) (ONEQ) has a PE ratio of 28.2x and a YTD return of 24.8%.

Nasdaq revenue (less transaction-based expense) is being projected to have a 6% and 7% growth in 2017 and 2018, respectively. Its diluted EPS (earnings per share) is being projected to rise 14% and 8% in 2017 and 2018, respectively.

The iShares Core Dividend Growth (DGRO) has a PE ratio of 20.6x and a dividend yield of 2.5%. The WisdomTree LargeCap Dividend ETF (DLN) has a PE ratio of 20.1x and a dividend yield of 2.3%.