Visa Gives Shareholders A Pay Raise (V, MA)

Banking, finance, and taxes

Published: October 20, 2010 4:45 pm

Last Updated: April 28, 2020 9:20 am

Visa Inc. (NYSE: V) just joined the ranks of companies hiking their annualized dividend payments. This is the second annual hike in a row. The increase was bumped up by 20% to $0.15 from $0.125 per share per quarter. This hike translates to $0.60 per year rather than $0.50 per year in annualized paybacks. Unfortunately, this comes to only about 0.75% for an implied yield based upon the closing price of $79.52. The prior yield was 0.6%.

The big question that had to be answered was how much the interchange fees were going to bite into earnings. Whether estimates change or not is up to the outcome of the interchange issue and based upon the number of transactions globally. Visa’s annualized estimates are $3.90 EPS for 2010 and $4.73 EPS for 2011, according to Thomson Reuters.

Many companies target a 40% payout. Without converting the share classes and taking that into consideration, Visa could afford to pay out another $1.00 per share if there is no drastic change to its earnings projections ahead.

As far as how this compares to rival MasterCard Incorporated (NYSE: MA), it still has an even lower yield down around 0.30% based upon its annualized payout of $0.60 and its $240.52 share price.

Visa has raised the payout, and MasterCard still has much room to improve.

JON C. OGG

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