Mastercard (MA) is the smaller cousin of Visa (V). Because of this it is often forgotten in the discussion of fintech stocks. But this is a mistake. Buying the No.2 player in an oligopoly can be profitable. One only has to look at Coca-Cola (KO) and Pepsi (PEP) for comparison. Buying the No. 2 player in the non-alcoholic beverage space has been good for total returns and dividend growth. Mastercard is a dividend growth stock that is now a Dividend Contender. Granted, the dividend yield is low at 0.50% and the price-to-earnings ratio is high at ~42X. But the dividend growth rate is very high, and the dividend safety is rock solid. The company generates a tremendous amount of free cash flow since the business is asset light. The stock is down nearly (-15%) from its recent highs and this may be a good entry point. For Mastercard’s dividend growth, I view the stock as a long-term buy.
Overview of Mastercard – Buy for Dividend Growth
Mastercard was founded in 1966 as a regional bankcard association and was known originally as the Interbank Card Association. The organization eventually became Master Charge after an acquisition and then Mastercard. The company conducted in IPO in 2006. Today, Mastercard is the second largest electronic payment processor in the world behind Visa. The firm authorizes, clears, and settles payment transactions. Mastercard processed $4.8 trillion in transactions in 2020, partners with over 25,000 financial institutions, and has nearly 3 billion cards in use. The firm has an estimated 29% market share for credit cards and 24% market share for debit cards. Mastercard’s larger competitor, Visa, processed nearly $9 trillion in transactions in 2020 and has over 50% market share making the market a oligopoly.
Interbrand ranked Mastercard as the 57th best global brand in 2020. Major card brands include Mastercard, Cirrus, and Maestro. Approximately 11% of voting shares are owned by the Mastercard Foundation and cannot be sold until 2027. Total revenue was $15,300 million in 2020 and $16,640 million in the LTM…
Disclosure: Long MA
Please read the complete article at my profile on Seeking Alpha for Mastercard – Buy for Dividend Growth.
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Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.