Mastercard is a leading global payments solutions company facilitating electronic funds transactions throughout the world. The company engages in authorizing, clearing and settling payment transactions and delivering related products and services. In addition, the company also provides other value added services such as information and analytics services, consulting, loyalty and reward points, etc.
Mastercard has a presence in more than 210 countries and territories facilitating both domestic and cross-border transactions across multiple payments flows. The U.S. constitutes nearly 30% of the total value of cleared transactions while the rest of the world accounts for 70%. The company operates through well-known brands such as MasterCard, Maestro, Cirrus, and Masterpass.
Mastercard caters to the needs of diversified customers ranging from individual consumers, merchants to governments, public sector and businesses, etc. It also provides customized business payment solutions for corporations by tailoring its core products for various corporate applications. The company runs 1300 programs with governments in 60 countries and partners with leading industry names such as Apple, Uber, Goldman Sachs, Unilever etc. As the second-largest credit card payment network in the world, Mastercard recorded $1.55 trillion worth of transactions with 2.5 billion Mastercard and Maestro-branded cards in circulation in the last quarter.Investment Data
- Opportunity Score: 53
- Ticker: NYSE:MA
- Sector: Financial Services
- Industry: Credit Services
- Market Cap: 278.95B
- P/E: 42.17
- Dividend Yield: 0.48
- Dividend Payout Ratio: 20.25
- FFO Payout Ratio: Dividend Snapshot Members Only
- FCF Payout Ratio: Dividend Snapshot Members Only
- Chowder Score: Dividend Snapshot Members Only
- Piotroski-F Score: Dividend Snapshot Members Only
- 3, 5, 10-year Revenue Growth: Dividend Snapshot Members Only
- 3, 5, 10-year Dividend Growth: Dividend Snapshot Members Only
Revenue Growth & Market Exposure
Mastercard’s revenues comprise fees for clearing transactions and providing other related services. With nearly five decades of existence, Mastercard has been finding innovative ways to make payments safer, faster and more reliable. The company’s products are designed to work seamlessly across all digital platforms, retail channels, and devices. Mastercard offers an array of card products and programs for consumers, businesses of all size, governments, and corporations.
Mastercard continues to expand with the acquisition of Brighterion, a software company specializing in artificial intelligence as well as NuData Security, a company that helps prevent online and mobile fraud. The acquisitions so far have helped the company in enhancing its technological and geographical footprint. An extensive network, an efficient and fast payments processing network, and globally recognized brands are Mastercard’s biggest strengths.
Mastercard is focusing on growing its customer base and creating new products and services. Its software-driven solution Masterpass QR is now live in 11 markets and poised to roll out in an additional 13 markets, including countries in the Asia Pacific, Latin America, the Middle East, and Africa. The company invests continually for technology improvements. MasterCard’s technology solutions are not only secure but also efficient and work effectively throughout the globe. The company is trusted for transaction safety and security and supporting seamless transaction flow.
MasterCard is in a good position to benefit from the trend of increasing digital payments through any device all around the globe. The total addressable market for payment flows is $225 trillion.
Mastercard has a sound track record of returning cash to its shareholders. The company last raised its dividends by 32%. The company also has a share buyback plan in place. It bought back 8.7
Million worth of shares during the first quarter, and has another $4.5 billion authorized for further buybacks.
Mastercard has a low dividend yield of 0.5% and a low payout ratio of 21%. The company has compounded its dividend growth at more than 30% CAGR in the last seven years. It is a dividend starter with a history of seven years of dividend increases.
Mastercard is looking at enhancing customer experience with technology developments through tokenization, APIs and QR codes. Given its leading reputation of a global payment partner, Mastercard is favorably positioned for key wins and partnerships across different geographies. The company continued to gain market share in developing economies and should benefit from the huge global opportunities out there.
Mastercard should continue increasing its market share with a strong focus on cross-border transactions and service offerings. A growing number of payments and international transactions should help the company continue paying its dividends. A low payout ratio also indicates enough room for future dividend hikes. The company should have no dearth of free cash flows with billions of cards in circulation today.
Mastercard competes with emerging as well as existing competitors such as Visa, American Express, Discover Financial Services, JCB and UnionPay. It competes against all forms of payment including paper-based payments, primarily cash and checks, as well as electronic payments. Mastercard faces intense competition from global and local networks, alternate payment providers, payment processors, and other electronic payments network. Security, convenience, speed, and reliability are Mastercard’s strong competitive advantages.
Mastercard is a global leader in providing a wide range of payment solutions and services, making payments easier and more convenient for its customers worldwide. The company’s extensive acquisitions and partnerships will further advance its cross-border payments. Mastercard is a preferred payments network partner for foreign banks and other financial institutions given its robust suite of products and services. A solid buyback program and low payout ratio provide enough reasons for shareholders to cheer.
The dividend yield may be low but the dividend growth and stock appreciation make up for the low yield. Just like VISA, it may always feel too expensive … I usually ease my way into a full position through 4 or 5 transactions.
DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.