Updated 3/11/25
Morningstar, Inc. (NASDAQ: MORN) is a well-respected name in the financial industry, known for providing investment research, analytics, and data-driven insights. It has built a reputation for helping both individual investors and institutions make smarter financial decisions. The company has a solid foundation in financial services, and while it may not be the first stock that comes to mind for dividend investors, it has consistently rewarded shareholders with steady payouts and a strong history of financial stability.
Unlike high-yield dividend stocks, Morningstar offers a different kind of appeal—a combination of consistent dividend growth and a well-managed balance sheet. This makes it an interesting choice for long-term investors looking for reliability and financial strength.
Key Dividend Metrics
📈 Dividend Yield: 0.64%
💰 Annual Dividend: $1.82 per share
📅 Ex-Dividend Date: April 4, 2025
📊 Payout Ratio: 19.46%
📈 5-Year Average Dividend Yield: 0.58%
📈 Dividend Growth: Steady increases over the past five years
🔍 Dividend Safety: Backed by strong cash flow
Dividend Overview
Morningstar doesn’t offer a high dividend yield, but what it lacks in yield, it makes up for in consistency. The stock currently yields 0.64%, which might not be appealing for those looking for immediate income, but its track record of dividend increases tells a different story.
With a payout ratio of just 19.46%, the company is comfortably paying dividends without putting stress on its earnings. This conservative approach allows Morningstar to reinvest in its growth while still providing a return to shareholders.
The next ex-dividend date is coming up on April 4, 2025. Investors who want to receive the next payout need to own shares before that date.
Dividend Growth and Safety
Dividend growth is one of Morningstar’s strengths. Over the last five years, it has steadily increased its dividend, outpacing its historical yield average of 0.58%. This consistent growth is a great sign for long-term investors looking for stable income.
The company also has a strong foundation when it comes to dividend safety. A payout ratio below 20% suggests the dividend is highly sustainable. Companies that keep their payout ratios low have more flexibility during economic downturns, making their dividends more reliable over the long haul.
Cash flow numbers back this up. Morningstar generated $591.6 million in operating cash flow and $482.71 million in free cash flow over the past year. These figures indicate the company has plenty of liquidity to continue growing its dividend while maintaining financial stability.
Chart Analysis
Trend Overview
Morningstar’s stock has been in a clear downtrend over the past few months, breaking below key support levels and showing continued weakness. The price has dropped significantly from its recent highs above 350 and is now trading around 279.59. The 50-day moving average (orange line) has turned downward and has crossed below the 200-day moving average (blue line), forming a death cross pattern. This is generally a bearish signal, suggesting that downward momentum is strengthening.
Moving Averages
The stock was trading above both the 50-day and 200-day moving averages for most of last year, indicating a period of sustained uptrend. However, the recent breakdown below both moving averages, combined with the downward slope of the 50-day, shows that sentiment has shifted. The 200-day moving average is still rising slightly but could start flattening or declining if the price continues to struggle.
Volume and Market Participation
Volume has increased during the recent decline, which suggests that selling pressure has been strong. The spike in volume seen in October indicates a large shift in sentiment, likely due to earnings or some major market event. More recently, trading volume has remained elevated compared to earlier in the chart, which means investors are actively participating in this move lower.
RSI and Momentum
The Relative Strength Index (RSI) is sitting well below 30, meaning the stock is in oversold territory. This indicates that selling may have been overdone in the short term, and there could be a potential bounce. However, RSI alone is not enough to confirm a reversal. If the stock stabilizes or forms a base at these levels, it could lead to some short-term buying interest.
Support and Resistance
The stock is hovering near an important psychological level around 280. If it holds this level, there’s a chance buyers step in to stabilize the price. If it breaks below, the next key support area could be closer to the 270 range, where prior consolidation took place. On the upside, the first resistance level would be the declining 50-day moving average, which is currently well above the current price level.
Analyst Ratings
📊 Morningstar, Inc. (MORN) has recently received a mix of analyst evaluations, reflecting both optimism and caution about its future performance. The consensus among analysts currently stands at “Outperform,” with an average price target of $371.67, suggesting a potential upside of approximately 27.87% from the current share price.
📈 Upgrades
🔹 UBS analysts have issued a “Buy” rating for Morningstar, setting a price target of $390.00. This optimistic outlook is based on the company’s strong financial performance, steady revenue growth, and its leading position in investment research. Analysts believe that Morningstar’s ability to expand its data services and subscription-based offerings will help drive continued profitability.
📉 Downgrades
🔻 Redburn Atlantic downgraded Morningstar to a “Hold” rating, assigning a price target of $340.00. The shift in sentiment stems from concerns about the company’s premium valuation and the challenges it may face in maintaining its growth trajectory. Analysts pointed to increased competition in the financial data space as a potential headwind that could put pressure on margins in the coming quarters.
📌 These differing perspectives highlight the importance of weighing both growth potential and valuation when assessing Morningstar’s long-term outlook.
Earnings Report Summary
Morningstar just released its latest earnings report, and there’s a lot to unpack. The company closed out 2024 on a strong note, showing solid revenue growth, increased profitability, and some big moves across its different business segments.
Fourth Quarter Highlights
Revenue came in at $591 million, marking a solid 9.7% increase from the previous year. This growth was fueled by strong performances from its credit ratings division and PitchBook, which continues to be a powerhouse for private market data. Operating income jumped a whopping 78.2% to $168.2 million, thanks in part to a one-time gain from selling some of its U.S. asset management operations. Even after adjusting for that, profits still showed healthy growth.
Net income for the quarter landed at $116.9 million, translating to $2.71 per share. That’s a big leap from last year’s $1.71 per share. Adjusted earnings per share came in at $2.14, reflecting an 8.6% increase. Cash flow was another bright spot, with operating cash flow rising over 11% to $153.4 million, keeping the company in a strong financial position.
Full Year Performance
For the full year, revenue totaled $2.3 billion, up 11.6% compared to 2023. The company’s core businesses, including Morningstar Credit and Data and Analytics, drove most of that growth. Operating income more than doubled, climbing 110% to $484.8 million, with margins improving significantly as well.
Net income was even more impressive, skyrocketing 162% to $369.9 million, or $8.58 per share. Free cash flow saw a huge jump too, up 127% for the year, giving Morningstar plenty of flexibility to invest in growth, pay dividends, and buy back shares.
Business Segment Breakdown
Morningstar’s data and analytics business remains its biggest revenue driver, bringing in $196 million for the quarter. PitchBook saw a strong 12.5% revenue increase, driven by a 16% boost in its user base. The credit ratings division was another standout, with revenue soaring 33.8% as demand for credit assessments grew.
On the wealth management side, assets under management and advisement rose by 12% to $62.3 billion, thanks to positive market performance and new client inflows. Meanwhile, the retirement division saw a nearly 20% jump in assets under management, reflecting strong demand for financial planning tools.
Balance Sheet and Capital Moves
Morningstar ended the year with $551 million in cash and cut its total debt to $698 million, significantly improving its financial flexibility. The company also repurchased over 33,000 shares during the year, returning capital to shareholders while maintaining a strong cash position.
Overall, it was a strong quarter and an even stronger year for Morningstar, with growth across multiple segments and continued financial discipline.
Financial Health and Stability
Morningstar’s ability to sustain and grow its dividend is closely tied to its overall financial strength, and in this area, the company is performing well.
Revenue continues to grow, coming in at $2.28 billion, reflecting a solid 9.7% increase year-over-year. Net income sits at $369.9 million, with a healthy profit margin of 16.26%. One of the standout metrics is its return on equity (ROE) of 25.11%, a strong indicator that management is effectively using shareholders’ capital.
Morningstar also has a solid balance sheet. With $551 million in cash on hand, it has enough liquidity to handle unexpected market challenges. The company’s debt-to-equity ratio of 55.85% is manageable, especially given its strong free cash flow generation.
A current ratio of 1.05 means the company has enough short-term assets to cover its liabilities, reducing the likelihood of financial stress.
Valuation and Stock Performance
Morningstar’s stock is currently trading at $284.43 per share, and its valuation reflects a company that investors are willing to pay a premium for. The current price-to-earnings (P/E) ratio is 32.93, which is on the higher side compared to many other financial services stocks.
A few key valuation metrics to consider:
- Price-to-Sales (P/S) ratio is 5.35, indicating a premium valuation relative to revenue
- Price-to-Book (P/B) ratio is 7.48, higher than many industry peers
- Enterprise Value/EBITDA is 17.03, which suggests that the stock isn’t cheap
Morningstar has underperformed recently, trading below its 50-day and 200-day moving averages of $323.36 and $320.43, respectively. The stock has a 52-week range of $278.64 to $365, meaning it’s closer to its yearly low. This could be an opportunity for long-term investors, but it also suggests some caution is needed given the recent price trends.
Risks and Considerations
Even though Morningstar has a solid track record, no investment is without risks. Here are a few factors that investors should keep in mind.
High Valuation Risk
Morningstar’s premium valuation means that the stock is priced for strong growth. If the company fails to meet expectations or experiences a slowdown, the stock could be vulnerable to a pullback. Paying a high multiple for a stock always comes with risks, especially in uncertain market conditions.
Modest Dividend Yield
For income-focused investors, Morningstar’s dividend yield of 0.64% might not be enough. The company is better suited for those looking for dividend growth rather than immediate income. While the payout is well-covered and growing, it won’t provide the same level of cash flow as higher-yielding stocks.
Competition and Market Position
Morningstar operates in a highly competitive industry. It faces strong competition from financial data giants such as Bloomberg and S&P Global, as well as smaller fintech firms that continue to disrupt the space. The ability to maintain pricing power and expand its offerings will be key to long-term success.
Market Volatility
With a beta of 1.23, Morningstar is more volatile than the broader market. In times of economic uncertainty, its stock price could swing more than some investors may be comfortable with. This is something to consider for those who prefer stable, lower-volatility dividend stocks.
Final Thoughts
Morningstar is a well-established company with a strong foundation in financial services. While it doesn’t offer a high dividend yield, it stands out for its steady and reliable dividend growth. Its low payout ratio, strong cash flow, and disciplined financial management make it a compelling option for investors who prioritize dividend safety.
The stock’s premium valuation is worth noting, and investors should consider whether they’re comfortable with its higher price-to-earnings multiple. For those who value long-term stability and dividend growth, Morningstar could be a worthwhile addition to a portfolio.
It may not be the best fit for those looking for immediate high-yield income, but for patient investors with a long-term mindset, it has the potential to deliver consistent dividend increases and financial resilience over time.
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