Updated 3/11/25
Moody’s Corporation (NYSE: MCO) is a name most investors in the financial world recognize. Best known for its credit rating services, the company plays a critical role in the global financial system, assessing the creditworthiness of governments, corporations, and other debt issuers. It operates through two primary segments: Moody’s Investors Service (MIS), which focuses on credit ratings, and Moody’s Analytics (MA), which provides risk management software and financial intelligence tools.
For dividend investors, Moody’s may not be the first stock that comes to mind. Its yield isn’t particularly high, but that doesn’t mean it should be overlooked. This is a company with a long history of increasing its payouts, strong financials, and a business model that generates reliable cash flow. Let’s break down what makes Moody’s an interesting choice for income-focused investors.
Key Dividend Metrics
💰 Dividend Yield: 0.84%
📈 5-Year Average Dividend Yield: 0.81%
💵 Annual Dividend: $3.76 per share
📊 Payout Ratio: 30.2%
📆 Ex-Dividend Date: February 25, 2025
🎯 Consecutive Years of Dividend Increases: 14+
Dividend Overview
Moody’s may not offer a high dividend yield, but what it does provide is reliability. For investors looking for consistent income growth, this stock has a strong track record. Over the past decade, the company has steadily increased its dividend, rewarding long-term shareholders.
At 0.84%, the dividend yield isn’t particularly impressive, especially compared to other financial sector stocks. However, the real value lies in its ability to grow over time. With a low payout ratio of 30.2%, there’s plenty of room for future dividend hikes, even during economic downturns.
For those who prioritize dividend safety over sheer yield, Moody’s stands out as a financially disciplined company that consistently returns capital to shareholders while reinvesting in its business.
Dividend Growth and Safety
📈 Dividend Growth Rate (Last 5 Years): ~11% CAGR
🔒 Dividend Safety: High
⚡ Earnings Growth Supports Future Increases
One of the best things about Moody’s dividend history is its steady growth rate. The company has increased its dividend at a double-digit pace annually, making it a solid choice for investors looking for rising income over time.
The payout ratio of 30.2% is quite low, meaning the company isn’t overextending itself to pay dividends. It generates more than enough free cash flow to cover these payments, and the low payout ratio suggests that Moody’s will likely continue raising its dividend in the years ahead.
With earnings per share (EPS) of $11.26 and a levered free cash flow of $2.24 billion, the dividend appears well covered. There’s little concern about sustainability here, and even in tougher economic times, Moody’s should have no trouble maintaining or increasing its payouts.
Chart Analysis
Price Action and Moving Averages
The price action on Moody’s Corporation (MCO) has been strong over the past year, showing a steady uptrend that accelerated in the later months of 2024. However, more recently, the stock has broken below its 50-day moving average, which had been acting as dynamic support for much of the rally. Now, with price slipping below both the 50-day and approaching the 200-day moving average, the trend is showing signs of weakness.
The 50-day moving average had been trending upwards alongside price, but the recent drop suggests that momentum is shifting. The 200-day moving average, which is typically viewed as a long-term trend indicator, is still rising. However, if the stock falls below this key level, it could confirm a deeper correction.
Volume and Market Participation
Looking at the volume bars, there’s been an increase in selling pressure over the past few weeks. The red volume bars—representing down days—are showing stronger activity, which indicates that more investors are taking profits or reducing their positions.
Earlier in the uptrend, volume spikes on green days showed accumulation, with institutions likely participating in the move higher. Now, the recent shift in volume suggests more sellers are stepping in, especially as price breaks through key moving averages.
Relative Strength Index (RSI)
The RSI, which measures momentum, has been declining from its previous highs. It was in overbought territory a few months ago, but now it’s heading toward the lower end of the range. If it continues to fall toward the oversold area, that could indicate that the stock is getting extended to the downside, potentially setting up for a bounce.
However, the RSI is not yet at extreme levels, which means there could still be room for further downside before buyers step in. This confirms that the recent price weakness is not just a short-term dip but part of a broader shift in sentiment.
Recent Candlestick Behavior
The last five candles show a mix of indecision and downside pressure. Recent daily wicks indicate some buying attempts, but sellers have been able to push price lower, closing near the lows of the session. This suggests that rallies are being sold into rather than attracting strong follow-through buying.
There was a brief attempt to hold the 50-day moving average, but once that level broke, the selling pressure intensified. The latest candle, which closed near the session low, suggests continued weakness in the near term. If the stock doesn’t find support at the 200-day moving average, it could trigger further technical selling.
Analyst Ratings
📈 Upgrades
Some analysts have expressed a positive outlook on Moody’s. 🏦 RBC Capital analyst Ashish Sabadra maintained a buy rating on the stock, setting a price target of 550. Sabadra’s optimism is based on Moody’s strong market position and consistent financial performance.
🔹 Barclays also reaffirmed its buy rating, assigning a price target of 570. Analysts supporting the bullish case for Moody’s believe that the company’s solid revenue growth and recurring cash flow make it a reliable long-term play.
📉 Downgrades
Conversely, some analysts have adopted a more cautious stance. 🚨 The average price target for Moody’s currently sits at 509.28, with forecasts ranging from a low of 395 to a high of 570. This variation highlights concerns that while some see potential for growth, others are wary of macroeconomic risks that could limit further stock appreciation.
🔻 Some analysts point to valuation concerns, with the stock trading at a premium compared to historical levels. Others highlight Moody’s exposure to credit cycles, as a slowdown in debt issuance could negatively impact revenue in its ratings business.
🎯 Consensus Price Target
As of the latest data, the consensus among analysts is a moderate buy rating for Moody’s, with an average price target of 558.08. This suggests a potential upside of around 23.75 percent from current levels.
📊 Price targets range from 508 on the low end to 610 on the high end, reflecting a mix of expectations on the company’s ability to sustain earnings growth in an evolving economic environment.
These varied perspectives underscore the importance of weighing both the potential and risks when considering an investment in Moody’s Corporation.
Earnings Report Summary
Moody’s Corporation wrapped up 2024 on a strong note, delivering impressive growth across both its credit ratings and analytics businesses. The company’s latest earnings report showed solid momentum, reflecting strong demand for its services in a dynamic financial environment.
Fourth Quarter Highlights
In the final quarter of 2024, Moody’s pulled in $1.67 billion in revenue, up 13 percent from the previous year. Both of its key business segments contributed to the growth, with the credit ratings side of the business seeing particularly strong results.
Moody’s Investors Service (MIS), the company’s credit ratings division, reported a 17.2 percent increase in revenue. This jump was fueled by a surge in debt issuance, as companies and governments continued to tap the bond markets. Meanwhile, Moody’s Analytics (MA), which provides financial intelligence and risk management tools, saw an 8.4 percent revenue boost—a sign that demand for data-driven decision-making remains strong.
Earnings per share for the quarter came in at $2.62, edging out analyst expectations and reinforcing the company’s ability to translate revenue growth into bottom-line success.
Full Year Performance
Looking at 2024 as a whole, Moody’s delivered $7.09 billion in total revenue, marking a 20 percent year-over-year increase. The credit ratings business was a major driver, benefiting from favorable market conditions that spurred more borrowing activity. But the analytics division also held its own, proving that Moody’s isn’t just reliant on one part of its business.
The company’s profitability remained strong, with margins holding steady and net income improving. A combination of solid revenue growth and effective cost management helped Moody’s maintain its strong financial footing.
What’s Next for 2025?
Moody’s management is optimistic about the year ahead, forecasting adjusted earnings per share in the range of $14 to $14.50. That’s higher than what analysts were expecting, suggesting the company sees continued demand for its credit ratings and risk management solutions.
As economic uncertainties persist, Moody’s remains well-positioned. Companies will still need credit ratings, and financial institutions will keep looking for reliable data to navigate market risks. With that in mind, the company’s strong performance in 2024 could be a sign of more growth ahead.
Financial Health and Stability
💼 Market Cap: $81 billion
💰 Total Cash: $2.97 billion
🏦 Total Debt: $7.91 billion
📊 Debt-to-Equity Ratio: 212.37%
Moody’s operates a highly profitable business, but it does carry a significant amount of debt. The company’s debt-to-equity ratio is over 200%, which is quite high. While this isn’t necessarily a dealbreaker, it’s something investors should be aware of—particularly in a rising interest rate environment.
The good news is that Moody’s has strong cash flow generation, which helps mitigate some of the risks associated with its debt load. The company’s operating cash flow stands at $2.84 billion, and it maintains a current ratio of 1.47, suggesting that liquidity isn’t an immediate concern.
Beyond its balance sheet, Moody’s return on equity (ROE) of 57.17% is a standout number. This indicates that the company is highly efficient in using its capital to generate profits, a quality that long-term investors should appreciate.
Valuation and Stock Performance
📊 Current Price: $443.85
📈 52-Week Range: $360.05 – $531.93
📉 Trailing P/E Ratio: 39.99
⚖️ Forward P/E Ratio: 32.15
Moody’s stock has been on an upward trajectory, trading near the higher end of its 52-week range. However, the valuation is a bit stretched, with a trailing P/E of nearly 40.
For investors focused on value, this might not be the most attractive entry point. Moody’s has long commanded a premium valuation due to its dominant market position and strong earnings growth, but at current levels, the stock isn’t exactly cheap.
Still, those who are willing to hold for the long term might find that the company’s steady earnings growth justifies its premium price. As long as Moody’s continues expanding its business and increasing its dividend, the valuation may not be a major concern for patient investors.
Risks and Considerations
🛑 Regulatory Challenges – Being a credit rating agency means Moody’s is constantly under regulatory scrutiny. Any changes in how credit ratings are issued or new compliance requirements could impact its operations.
📉 Economic Sensitivity – Moody’s business is tied to debt issuance, which fluctuates based on economic conditions. During downturns, companies issue less debt, which can lead to slower revenue growth.
💰 Debt Load – While Moody’s generates strong cash flow, its high debt-to-equity ratio means it carries a substantial amount of financial leverage. Rising interest rates could increase borrowing costs and squeeze margins.
📊 Valuation Concerns – With a high P/E ratio, the stock isn’t a bargain. If growth slows, investors could see some multiple compression, which might put pressure on the stock price.
Final Thoughts
Moody’s may not be the first stock that comes to mind for income investors, but it has plenty of attractive qualities. It offers a combination of dividend safety, steady growth, and strong financial performance, making it a reliable option for long-term investors.
While the yield is on the lower side, the company has a long track record of raising its dividend and is in a strong position to continue doing so. The low payout ratio and consistent earnings growth make it a solid choice for those who prioritize stability over high yields.
The stock is expensive, and the company carries a fair amount of debt, but Moody’s overall financial strength helps offset these concerns. For investors looking for a dependable, growing income stream, this is a business that continues to deliver.
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