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Here's Why You Should Add Nasdaq (NDAQ) to Your Portfolio

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Nasdaq (NDAQ - Free Report) is well-poised for growth based on organic initiatives, strategic buyouts, and solid capital position.

Shares of Nasdaq have gained 4.6% year to date against the industry's decline of 0.7%. The Zacks S&P 500 composite has risen 11.1% in the said time frame. The Zacks Consensus Estimate for 2020 and 2021 earnings indicates 11.2% and 4% growth, respectively, from the year-ago reported figure. The expected long-term earnings growth rate is 8.8%, higher than the industry’s average of 6.8%.

The company’s return on equity of 16.1%, which has improved over the past seven years, remains higher than 12.2% for the industry, reflecting the company’s tactical efficiency in using shareholder’s funds.


Nasdaq’s impressive growth is driven by organic growth and strategic acquisitions. While the company has increased focus on Market Technology and Information Services businesses, offering the biggest growth opportunities, its organic growth has aided by its strategy of accelerating its non-trading revenue base. Management expects 5-7% medium-term growth from non-trading revenue base.

The company remains focused on maximizing opportunities as a technology and analytics provider. To that end, Nasdaq acquired ESG workflow provider, OneReport, and investment analytics firm, Solovis, during the first quarter.

Its diverse business model helps Nasdaq enjoy a healthy balance sheet and cash position along with modest operating cash flow.

Given sustained strong performance, the company engages in effective capital deployment.  With the 4% hike in April 2020, the company’s dividend payout saw a five-year CAGR (2014-2019) of 29.31%. Its dividend yield of 1.8% betters the industry average of 1.5%, making the stock an attractive pick for yield-seeking investors.

This Zacks Rank #2 (Buy) leading provider of trading, clearing, marketplace technology, regulatory, securities listing, information and public and private company services has a solid history of delivering positive surprise in each of the last five quarters with the average beat being 3.35%.

Other Stocks to Consider

Investors interested in the same industry can look at CME Group (CME - Free Report) , Cboe Global Markets (CBOE - Free Report) and Intercontinental Exchange (ICE - Free Report) , each carrying Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CME operates contract markets for the trading of futures and options on futures contracts worldwide. The company delivered 4.48% positive surprise in the last reported quarter.

Cboe Global operates as an options exchange in the United States. The company delivered 7.14% positive surprise in the last reported quarter.

Intercontinental Exchange operates regulated exchanges, clearing houses, and listings venues for commodity, financial, fixed income, and equity markets in the United States, the United Kingdom, European Union, Singapore, Israel, and Canada. The company delivered 4.07% positive surprise in the last reported quarter.

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