CMC Markets Share Have Dropped, Higher Dividend Make it pop?

Today we start a series about listed trading companies and first out is CMC Markets. The company is listed on FTSE 250 and is thus one of the two hundred and fifty largest companies listed on the London Stock Exchange.

At the end of last week and continuing this week, CMC Markets has dropped drastically, over 30%, while the dividend was raised to 6.7%. Despite the fact that revenues for CMC Markets have risen by over 100% in the last year, investors became worried about the seasonal effects of reduced trading during the summer.

However, ForexTrading.uk has noted over a long period of time that people normally trade considerably less during the summer and that significant seasonal effects are normal. In addition, the summer has better weather while the stock market and the fx market have been unusually quiet, with rather low volatility.

This has also contributed to reduced trading, which normally starts more in September and October. So even though CMC Markets’ stock has fallen sharply at the end, a turnaround could possibly be in sight, due to a super-high dividend that may give a little less risk? CMC Markets (review) has one of Europe’s best in-house trading platforms, called Next Generation, although MT4 is available as an alternative.

Below we go through the advantages and disadvantages of CMC Markets share (London: CMCX), explain about the increased dividend and analysts’ opinions about the share.

Advantages of the CMC Markets share

+ 57% traded below analysts’ estimate of the fair value of the CMCX share.
+ Profit increased by as much as 104.9% during the past year.
+ Increases the dividend to 21.43 pence per share, from the previous 9.2 pence. The distribution will take place on Thursday, September 9, 2021.
+ Outstanding trading platforms such as its own Next Generation which has won several awards, as well as the world famous MetaTrader 4.
+ Extremely large selection and a fantastic user-friendly interface.

Risks with CMC Markets share

-Return vs. sector: CMC Markets shares have underperformed other UK trading companies by just over 20% over the past year. Should the stock go down more before it turns?
-CMCX has also gone 26% worse than the stock market in the UK, but a turnaround might be on the way soon?
-It is likely that the dividend will be reduced next year.
-Some may sell off the share after the dividend?
-The profit fell during the summer, but is it not mostly a volatility and seasonal effect?

Increasing the dividend to 6.7%

CMC Markets Plc has announced that the company will increase the dividend to £ 0.21 per share, on September 9, 2021. Given that each share costs less than £ 3, it is a really high dividend that awaits all patient shareholders. The previous dividend will thus increase by 11.8 pence per share and now stands at 6.7%. This means that you take 75% of what is in the cash register, directly for dividends. Rarely have such generous dividends been seen, but CMC Markets really stands out as a real high-yield. The question then is above all how long it will last and whether the dividend in 2022 will be close to as high as the one that comes on Thursday 9 September.

Reduced share price for CMC Markets, despite positive analysts

CMC Markets’ share has fallen just over 45% from its peak in early April, 2021. But some experienced analysts still have the target price significantly higher than the current price, which is around 297 pence (same as 2.97 pounds) at the time of writing.

One of them is, RBC Capital Markets has set the target price at 550 pence – an increase of just over 85% against current levels and this is without the dividend being included. Another analysis company, Canaccord Genity, has set the target price at 463. Is it a buy or sell position? You can either buy shares or sell through CMC Markets.

What are the reasons for the low share price for CMC Markets?

The stock market was alarmed by the earnings warning for the FTSE 250 stock, which reveals subdued market activity during July and August for both new customers, but also for existing ones.

This is probably due to the fact that the pandemic created extra large trading opportunities earlier this year and the figures for trading volumes have been slightly overestimated. At the same time, there will always be more instruments, new stock baskets and an additional range of currencies. By the way, we at Valutahandel.se believe that the autumn and winter will be significantly more active months for trading, as people sit indoors more and do not lie on the beach instead of trading currency. Tip: For an outstanding trading experience, where you yourself are king, try Next Gen from CMC Markets today!

The news lowered the FTSE 250 Group’s shares by more than a quarter on Thursday last week after it said that “subdued” market activity in July and August resulted in less trading from both new and existing customers. On Thursday, subdued trading and reduced volatility in the market were highlighted, which sent the shares in the online trading platform down. At the same time, CMC Markets mentions that robust and overall monthly active customer numbers are at the same level as those reported in the latest record for the record during the first quarter. In addition, customers’ assets under management remain close to record levels.

How is CMC Markets Next Generation for trading?

One of the market’s best trading platforms, Next Generation from CMC Markets, is extremely trade-friendly, powerful and can be tailored to the smallest detail. Despite this, the stock market has sold off the stock significantly, which is now traded for 297 GBX. This is the same as £ 2.97, as GBX stands for pence. The decline for CMC Markets is just over 45% since the second week in April, or 30% down since the beginning of the week.

Risk warning: This is not a buying advice or recommendation, but a post from a personal individual who bought the share himself. It should be noted that forward-looking statements involve known and unknown risks, assumptions, uncertainties and other factors that may cause the Group’s actual results, performance or performance to differ materially from future results.

The author personally bought 3,000 shares in CMC Markets on Thursday as a multi year holding, as his view is that the concern is excessive and mostly due to a sunny summer, reduced trading opportunities during the summer due to reduced volatility and consolidation of cryptocurrencies. When the summer is over, volatility can be expected to increase again and since the cryptocurrencies have been volatile for a month, trading activity will probably increase again during the autumn and winter. If the high dividend is worth the risk is up to you to judge, but an extra dividend of £0.2 per share is not bad.

Published: Fri, 10 Sep 2021 15:58
Author: Markus Jalmerot

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