This week, this payments processing company announced a 16% dividend hike, pushing its quarterly cash payout up $0.03, to 22 cents.
MasterCard (MA)
From Hendershot Investments
MasterCard (MA) is a technology company that operates the world’s fastest payments processing network, connecting consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories.
In 2015, more than half of the company’s $9.7 billion in revenues was derived from countries outside of the U.S.
The MasterCard brand is among the most recognized in the world. The company offers a wide range of payment solutions, including credit, debit, prepaid, digital wallet and commercial programs through a family of well-known brands, including MasterCard, Maestro and Cirrus. With a proprietary global payments network, MasterCard connects close to two billion cardholders with tens of millions of merchants around the world.
In the last five decades, the rise of electronic payments has fueled economic growth while delivering value to merchants, consumers and governments. With 85% of the world’s transactions still made with cash and checks, there is significant opportunity for further long-term growth for the company as billions of people migrate away from cash to a more efficient and secure global payment network as the digital and physical worlds converge.
Over the past five years, MasterCard has generated double-digit growth with sales and EPS compounding at 10% and 23% annual rates, respectively. During the third quarter of 2016, revenues rose 14% to $2.9 billion and EPS charged 26% higher to $1.08. Third quarter results reflected double-digit growth in key metrics, including an 11% increase in gross dollar volume to $1.2 trillion; a 12% increase in cross-border volume; and an 18% increase in processed transactions, to 14.5 billion. MasterCard’s business model is highly profitable with net profit margins steadily expanding from an excellent 28% in 2011 to a superb 39% in 2015.
With profitable operations and minimal capital expenditure needs, MasterCard generates strong free cash flows. The dividend has been increased significantly in the last five years from $.06 per share to the current $.76 per share. During the third quarter of 2016, MasterCard paid $630 million in dividends and repurchased approximately 6 million shares of Class A common stock at a cost of $591 million or an average price of $98.50 per share.
Long-term investors should go shopping with MasterCard, a High quality company with a strong global brand, double-digit growth, highly profitable operations and strong cash flows. Buy.
Ingrid R. Hendershot, Hendershot Investments, www.hendershotinvestments.com, 703-361-6130, December 2016