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Mastercard (MA) Raises Dividend, Okays New Buyback Program

The board of directors at Mastercard Incorporated MA recently approved a hike of 11% in the quarterly cash dividend aimed at boosting shareholder value. The hike takes the latest payout to 49 cents per share compared with the prior payout of 44 cents.

Denoting the eighth consecutive year of dividend increase, the meatier dividend will be paid on Feb 9, 2022 to shareholders of record as on Jan 7, 2022. Prior to the recent 11% hike, Mastercard had upped its quarterly dividend by 10% in December 2020.

MA has been a regular dividend paying company since 2006. This Zacks Rank #3 (Hold) leading technology company in the global payments space has grown its dividend at a eight-year CAGR of 20.5%. Based on the stock’s Nov 30 closing price of $314.92, the new dividend will yield 0.6% to the company.

Apart from continuous dividend hikes, Mastercard engages in regular buying back of shares. MA’s board, concurrent with the recent dividend hike declaration, authorized a new share repurchase program. The new program equips Mastercard to buy back shares of up to $8 billion.

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With roughly $4.4 billion left under MA’s earlier sanctioned $6 billion buyback program announced last year, the new $8 billion program will come into effect once the in-effect share repurchase program is concluded.

During the first nine months of 2021, Mastercard bought back 12.8 million shares worth $4.6 billion. In addition to this, MA paid dividends worth $1.3 billion to shareholders in the same time frame.

Time and again, Mastercard has resorted to prudent capital deployment moves. MA’s return on equity, a profitability measure that is used to identify a company’s ability to utilize its shareholders’ fund, stands at 116.9% as of Sep 30, 2021. The figure remains way above the industry’s average of 29.3%.

If a company consistently raises dividends each year along with regular share buybacks, the scenario highlights the company’s sound liquidity position. This is important for not only relieving a company of debt-laden balance sheet risks but also paves the way for an accelerated capital deployment. Also, strong cash flows empower a company to undertake several growth initiatives. Similarly, Mastercard boasts of a solid cash balance and robust cash generation abilities. Net cash provided by operating activities of MA increased 26.2% in the first nine months of 2021 from the prior-year comparable period.

Other companies in the financial transaction services space, namely, Visa Inc. V, Global Payments Inc. GPN and The Western Union Company WU have resorted to effective capital deployment to enhance shareholders value.

Visa has been a regular dividend paying company since 2008. In fiscal 2021, V repurchased shares and paid dividends worth $8.7 billion and $2.8 billion, respectively. Strong top-line growth, numerous acquisitions and mergers, and solid balance sheet are likely to continue aiding Visa in returning value to shareholders.

Global Payments has a dividend yield of 0.8% and boasts of cost-saving measures and robust cash generation abilities with which GPN can continue to boost shareholders’ value. In the first nine months of 2021, Global Payments bought back shares and paid dividends to the tune of $1.8 billion and $188.2 million, respectively.

Western Union has been paying dividends since 2006 and engages in regular buying back of shares. A well-performing Consumer to Consumer segment and financial strength should sustain WU’s long-term commitment to increase shareholders’ returns. While Western Union repurchased $225 million of shares in the first nine months of 2021, the same paid dividends worth $287.6 million in the same time frame.

Shares of Mastercard have lost 7.4% in a year compared with the industry’s decline of 25.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks Investment Research
Zacks Investment Research

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Shares of Visa, Global Payments and Western Union have declined 7.8%, 39.1% and 29.1%, respectively, in a year.


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Mastercard Incorporated (MA) : Free Stock Analysis Report

Visa Inc. (V) : Free Stock Analysis Report

The Western Union Company (WU) : Free Stock Analysis Report

Global Payments Inc. (GPN) : Free Stock Analysis Report

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