No one expects to buy a so-called income stock and see the value of their stake rocket in value. After all, the primary goal is to generate a consistent dividend stream, not crush the market return.

However, this is exactly what’s happened for holders of a certain member of the FTSE 250.

Incredible gain

Online trading and investment platform provider CMC Markets (LSE: CMCX) has seen its share price soar 200% in the last 12 months. In sharp contrast, the mid-cap index has managed around 14%.

The key reason for this massive outperformance is that the company has been raising its guidance on net operating income. One of the biggest catalysts for this has been CMC’s expansion into providing technology to other financial institutions, such as banks. The “exponential and exceptional growth” seen in this part of the business has boosted profit margins thanks to a “largely fixed cost base“.

The war in Iran has also made markets volatile, leading to more client activity.

Is this still an income stock?

We could be forgiven for thinking that such an incredible run means the dividend yield is now very low. But that’s not the case.

Despite the rocketing share price, CMC shares still yield 3%. This is based on the company returning a total of 20.8p per share, as analysts have predicted. Obviously, we won’t know for sure until the final dividend is confirmed.

That yield is currently on par with the index as a whole. So, the question is whether it’s worth the extra risk that comes from backing an individual company over, say, a tracker fund that spreads money around the market?

Well, the outlook certainly seems (very) positive. In its most recent update at the beginning of July, the firm said that it now expects net operating income for FY27 to be at least £550m. This was a huge upgrade on the previous estimate of between £460m and £480m.

Taking this into account, it doesn’t seem like CMC is going to have any trouble chucking cash out to its shareholders for a while. Although clearly not the bargain it once was, a price-to-earnings (P/E) ratio of 13 times still doesn’t feel excessive for a business like this.

Nothing is certain

Even so, it’s worth remembering that relying solely on a single stock for passive income (or anything else) is risky. As far as CMC is concerned, significant falls in the total dividend were observed in 2022 and 2023, as earnings normalised following the pandemic and cost pressures increased.

Other risks to CMC include more regulation in this space and the possibility that B2B growth slows. Regardless, it’s not short of competition.

This is why running a diversified portfolio can be so important.

My verdict

Despite the above, I continue to seriously rate this company. I also wouldn’t be surprised if the share price pushed even higher in the absence of any unforeseen wobbles in trading. But I just can’t see performance over the next 12 months being quite as stellar. Perhaps the ‘easy money’ has already been made here.

Fortunately, there’s no shortage of other passive income options in the UK stock market to consider buying alongside CMC.

What income stock do we like better than Cmc Markets Plc right now?

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Paul Summers has no position in any of the shares mentioned