Western Union (WU) is little followed these days since it is no longer growing. Revenue has been flat for years, even after accounting for divestitures. Furthermore, competition in money transfer is increasing, and the competition often has deeper pockets. The stock price is down over (-20%) since its high in April 2021, putting it in bear market territory. However, Western Union’s core business is highly profitable and is a cash cow. The company has strong brand name recognition. The company is also moving aggressively into digital money transfer and is now moving into digital banking with the WU+ app. Western Union pays a ~5.6% dividend yield, and the divined safety is acceptable. The company has raised the dividend seven consecutive years, making it a Dividend Challenger. For investors seeking income from an alternative source, I view Western Union as a buy.
Overview of Western Union
The Western Union Company is the global leader in domestic and international money transfers. The company has a network of roughly 550,000 agents worldwide and does business in more than 200 countries. Approximately 90% of agents are outside of the US. Western Union operates three business segments: Consumer-to-Consumer [C2C] (88% of total revenue), Business Solutions (7% of total revenue), and Other (5% of total revenue). Western Union sold the Speedpay (U.S. bill payments) and Paymap (mortgage payments) businesses in 2019. The company had approximately $4,835 million in revenue in fiscal 2020 and about $5,508 million in the LTM.
Growth and Margins
Growth has been hard to come by for Western Union. Its core business of consumer-to-consumer [C2C] money transfer is mature. Western Union is one of two global players in the C2C market. The business model is capital-light. The retail agents are not employees, and adding new agents results in an incremental expense. The electronic network that processes money transfers is very scalable. The company has more than 550,000 retail agents worldwide, essentially reaching every corner of the world…
Please read the complete article at my profile on Seeking Alpha for Western Union – An Alternative for Income.
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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.