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TMX Group boosts dividend as trading surges

TORONTO - A resurgence in some trading activity has enabled Toronto Stock Exchange operator TMX Group Inc. (TSX:X) to raise its dividend for the first time since equity markets crashed.

TORONTO - A resurgence in some trading activity has enabled Toronto Stock Exchange operator TMX Group Inc. (TSX:X) to raise its dividend for the first time since equity markets crashed.

"The resurgence in activity across some of our key revenue drivers, combined with focused cost control led, to strong growth in our bottom line," said chief executive Thomas Kloet.

"So, with confidence we thought that we could raise the dividend and reward the shareholders," he told analysts on a conference call Wednesday to discuss the group's third-quarter results.

The two cent dividend boost of its quarterly payment — to 40 cents per share — is a sign the group is confident about the future, Kloet said. This is the first time since 2007 it has raised its dividend.

TMX Group, which also operates the Montreal Stock Exchange and the Toronto Venture Exchange, reported third-quarter net income of $50.8 million, or 68 cents per share, on Wednesday.

That beat analyst expectations of 64 cents per share, according to a survey by Thomson Reuters, and compared with a profit of $41.7 million, or 56 cents per share, a year earlier.

Revenues rose eight per cent to $141.6 million, slightly above analyst predictions. Meanwhile, the volume of trading in derivatives was up 28 per cent at the Montreal Exchange.

TMX said it has been able to keep costs fairly flat over last two years despite taking on new initiatives and those lower expenses also helped drive profits higher in the third quarter.

Brendan Caldwell of Caldwell Securities said investors responded quite positively to the dividend increase, as shares in TMX Group hit a 52-week high Wednesday on a day the broader market was sharply lower.

Shares in TMX Group closed up 62 cents at $34.18 on the Toronto Stock Exchange on Wednesday after trading as high as $34.65 during the day.

Caldwell said the dividend increase was significant not only for the company, but indicates that other financial services companies, including Canada's big five banks could soon follow.

He predicted the TMX Group will continue to generate positive earnings as markets pick up and financing and trading activity grow.

"(Stock markets) actually make more money from volatility than they do from simply rising market, but they do make more money from a rising money, listing fees, IPOs, that helps them tremendously."

The stock exchange operator has benefited from a growing interest among foreign companies and now has 300 international listings on its exchanges, including 52 Chinese companies, 147 based in the United States and more than 30 from Australia.

Kloet said many potential international listers are intrigued by its unique "two-part marketplace," which includes the TSX Venture Exchange as a venue for small- to medium-sized companies seeking financing, and the senior Toronto Stock Exchange.

Kloet added that he believes a rebound in equity markets will provide a stable platform as the company launches a new trading system.

"It's clear that the market evolution in Canada continues," Kloet said, adding that the timing is right to introduce TMX Select, a new alternative trading system that will operate on its Quantum trading platform.

The new exchange will include expanded trading hours and a simplified market structure.

TMX is also closely watching the takeover of the Australian Stock Exchange by Singapore Exchange Ltd. announced Tuesday, a move that has already initiated merger and acquisition speculation about other markets.

Caldwell said if the Singapore exchange paid more than $8.5 billion for the ASX, surely TMX Group is worth more than the $2.5 billion suggested by its current stock market value.

"We're 50 per cent larger than Australia in every, way, shape and form," he said.

Kloet said TMX Group is already involved in a number of international partnerships and is open to examining a closer partnership or acquisition opportunities in future.

Kloet also said that the TMX is working on developing a domestic solution to the G20 leaders' objectives related to improving the over-the-counter derivatives markets.

"We think as a G8 country with a mature economy, that Canada should have a domestic solution," he said. "We think we will be presenting a very compelling proposal for the Canadian marketplace."

Besides the Toronto Stock Exchange, TSX Venture Exchange and Montreal Exchange, TMX Group also operates the Natural Gas Exchange, the Boston Options Exchange, Shorcan and Equicom.

 
 
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