There are no material changes subsequent to my October 25, 2025 post. The purpose of this brief post, therefore, is merely to disclose the purchase of an additional 100 shares @ $266.875 on January 6, 2026 in a ‘Core’ account in the FFJ Portfolio.
Dividend and Dividend Yield
The following is reflected in CME’s FY2024 Form 10-K.
We intend to continue to pay a regular quarterly dividend to our shareholders, with a target of between 50% to 60% of the prior year’s cash earnings. The decision to pay a dividend and the amount of the dividend, however, remains within the discretion of our board of directors and may be affected by various factors, including our earnings, financial condition, capital requirements, levels of indebtedness and other considerations our board of directors deems relevant. We are also required to comply with restrictions contained in the general corporation laws of our state of incorporation, which could limit our ability to declare and pay dividends.
CME’s dividend history is accessible here.
NOTE: In conjunction with the December 5, 2024 declaration of the ‘special’ variable dividend, CME indicated that it intends to continue its variable dividend structure. Beginning in 2026, however, the declaration and payment of the annual variable dividend will align with the first quarter regular dividend paid in March 2026. The ‘special’ variable dividend used to be paid in mid-January.
We now see from recent Investor Presentations that the opportunistic repurchase of outstanding shares is a component of CME’s capital return to shareholders. This presentation is accessible under Investor Materials and Investor Presentation.
In FY2014 and FY2024, the weighted average outstanding diluted shares outstanding (in millions of shares rounded) was 336.063 and 359.944. In the 9 months ending September 30, 2025, it was ~360.297.
When CME announced that its Board approved a share repurchase program in December 2024, I envisioned it would start addressing my concern about the steady growth of diluted outstanding shares.
Given the introduction of share repurchases, the magnitude of CME’s annual variable ‘special’ dividend is likely to be lower than that in recent years (eg. $5.80 disbursed on January 16 2025 and $5.25 disbursed on January 18, 2024).
Valuation
On January 6, 2026, I acquired an additional 100 shares @ $266.875. Using the current forward adjusted diluted EPS broker estimates, CME’s forward adjusted diluted PE levels are:
- FY2025 – 14 brokers – mean of $11.18 and low/high of $10.98 – $11.33. Using the mean estimate, the forward-adjusted diluted PE is ~23.9.
- FY2026 – 14 brokers – mean of $11.67 and low/high of $11.15 – $12.25. Using the mean estimate, the forward-adjusted diluted PE is ~22.9.
- FY2027 – 9 brokers – mean of $12.38 and low/high of $11.66 – $13.26. Using the mean estimate, the forward-adjusted diluted PE is ~21.6.
I reflect the following in my October 25, 2025 post.
I exclude any opportunistic share repurchases in my valuation estimates.
YTD2025, CME generated $7.92 of diluted EPS and $8.43 of adjusted diluted EPS.
CME’s current share price is $269.54. Using the current forward adjusted diluted EPS broker estimates, CME’s forward adjusted diluted PE levels are:
- FY2025 – 16 brokers – mean of $11.12 and low/high of $10.88 – $11.53. Using the mean estimate, the forward-adjusted diluted PE is ~24.2.
- FY2026 – 16 brokers – mean of $11.62 and low/high of $11.03 – $12.14. Using the mean estimate, the forward-adjusted diluted PE is ~23.2.
- FY2027 – 11 brokers – mean of $12.43 and low/high of $11.55 – $12.96. Using the mean estimate, the forward-adjusted diluted PE is ~21.8.
CME’s YTD2025 FCF/share is ~$8.632 and ~$8.449 using the conventional and modified calculated methods. I do not anticipate any share repurchases the remainder of the year. Additional SBC in Q4 is unlikely to materially change the number of outstanding shares. I, therefore, use ~360.4 million shares the gauge CME’s valuation; the YTD weighted average is ~360.33 million.
If CME generates a similar level of FCF in Q4 as in the prior 3 quarters, FY2025 FCF could be ~$11.5 and ~$11.27 (I have added ~33.3% of YTD FCF to estimate FY2025 FCF).
Divide the current $269.54 share price by these FCF estimates and CME’s P/FCF is ~23.4 and ~24. CME’s FCF conversion ratio is typically above 100%. It is, therefore, reasonable to expect CME’s valuation based on FCF to be superior to that based on adjusted diluted EPS.
NOTE: These valuations could improve depending on the extent to which CME repurchases shares.
In my July 26, 2025 post, I estimated CME’s valuation using July 25’s $279.55 closing share price.
Management does not provide earnings guidance, and therefore, I extrapolate YTD2025 results. In the first half of FY2025, CME generated diluted EPS and adjusted diluted EPS of $5.43 and $5.75. If the second half of the year is relatively similar to the first half, FY2025 diluted EPS and adjusted diluted EPS should be ~$10.86 and ~$11.50. Erring on the side of caution, I use the ~$11.18 mid-point thus suggesting the current adjusted diluted PE is ~25.
Using the current forward adjusted diluted EPS broker estimates, CME’s forward adjusted diluted PE levels are:
- FY2025 – 17 brokers – mean of $11.15 and low/high of $10.75 – $11.53. Using the mean estimate, the forward-adjusted diluted PE is ~25.1.
- FY2026 – 17 brokers – mean of $11.59 and low/high of $10.94 – $12.11. Using the mean estimate, the forward-adjusted diluted PE is ~24.1.
- FY2027 – 11 brokers – mean of $12.39 and low/high of $11.57 – $13.06. Using the mean estimate, the forward-adjusted diluted PE is ~22.6.
CME’s YTD2025 FCF/share is ~$5.946 and ~$5.830 using the conventional and modified calculated methods. I do not anticipate any share repurchases the remainder of the year. Fortunately, additional SBC in the second half of the year is unlikely to be meaningful. Given this, the weighted average diluted shares outstanding in FY2025 should be just marginally higher than the YTD weighted average. On this basis, I estimate CME’s FY2025 FCF will be ~$11.90 and ~$11.67. Divide the current $279.55 share price and CME’s P/FCF is likely close to ~23.5 and ~24. CME’s FCF conversion ratio is typically above 100% so it seems reasonable to expect CME’s valuation based on FCF to be slightly superior to that based on adjusted diluted EPS.
Final Thoughts
I currently hold 579.83868 shares in a ‘Core’ account and 414 shares in a ‘Side’ account within the FFJ Portfolio for a total of 993.83868 shares.
The brokerage firm where I hold the ‘Core’ account now offers the purchase of fractional shares using the dividend income received. This explains why one account holds 579.83868 shares.
When I completed my 2025 Year-End Investment Holdings Review, CME was my 14th largest holding. At the time of my 2025 Mid-Year Portfolio Review, it was my 11th largest holding.
Despite the comments in my Dividends Have Drawbacks post, I am a CME shareholder because I like the business and long-term prospects.
Now that opportunistic share repurchases are a component of CME’s capital return to shareholders, I have a greater interest in adding to my exposure when the company’s valuation is attractive.
I wish you much success on your journey to financial freedom!
Note: Please send any feedback, corrections, or questions to finfreejourney@gmail.com.
Disclosure: I am long CME.
Disclaimer: I do not know your circumstances and do not provide individualized advice or recommendations. I encourage you to make investment decisions by conducting your research and due diligence. Consult your financial advisor about your specific situation.
I wrote this article myself and it expresses my own opinions. I do not receive compensation for it and have no business relationship with any company mentioned in this article.
