Mastercard Incorporated’s ( MA Quick Quote MA - Free Report) board of directors recently approved a 10% hike in the quarterly dividend in a bid to enhance shareholder value. With the latest move, the payout now stands at 44 cents per share compared with the prior payout of 40 cents.
The meatier dividend, which marked the seventh straight year of dividend hike, will be paid on Feb 9, 2021 to shareholders of record as on Jan 8.
Prior to the recent dividend raise, the company had upped quarterly dividend by 21% to 40 cents per share last year in December.
Notably, the company has grown its dividend at a seven-year CAGR of 21.9%. Based on the stock’s Dec 8 closing price of $340.79, the new dividend will yield 0.5% to the company.
Besides regular dividend hike, Mastercard also engages in buying back shares. Concurrent with the latest move, the company’s board authorized a new share repurchase program, which has enabled the company to buy back shares of up to $6 billion. However, the new program will come into effect once the company’s $8 billion share repurchase program announced last year is concluded. Notably, the company has around $3.8 billion remaining under its existing buyback program.
It is worth mentioning that the financial uncertainties induced by the COVID-19 crisis had compelled most companies to suspend their share repurchase activities. Mastercard was no exception to the trend and temporarily put its share buyback activities on hold in the first-quarter 2020. Nevertheless, the company recommenced share buyback at the end of the second quarter, which is commendable.
Moreover, Mastercard has bought back 11.2 million shares worth $3.4 billion during the first nine months of 2020, which includes 6.5 million shares bought back for $2.1 billion in third-quarter 2020.
Furthermore, the leading global payments company enjoys strong liquidity position, which not only mitigates balance sheet risks but also paves the way for an accelerated capital deployment. Also, strong cash flows have enabled the company to undertake several growth initiatives such as accretive buyouts and an expansion of service offerings., which position it well for long-term growth.
The recent dividend hike and a new buyback program reinforces the company’s robust financial prospects further. Mastercard exited third-quarter 2020 with a sturdy cash balance of $10.2 billion, which surged 46.3% from 2019-end level.
Additionally, return on equity, a profitability measure to identify the tactical utilization of shareholders’ funds by the company, stands at 114.8% as of Sep 30, 2020, which is higher than the
industry’s average of 26.7%.
Shares of Mastercard have gained 18.1% in a year compared with the industry’s rally of 12.6%. Moreover, we believe the company’s numerous growth initiatives and significant investments made in technology for accelerating the shift to digital forms of payment are likely to sustain its momentum in the days ahead.
The company’s peers, namely,
Visa Inc. ( V Quick Quote V - Free Report) and American Express Company ( AXP Quick Quote AXP - Free Report) have rallied 16.8% and 2.2%, respectively, in a year’s time, while that of Discover Financial Services ( DFS Quick Quote DFS - Free Report) have lost 3.4% in the same time period.
Notably, Mastercard carries a Zacks Rank #4 (Sell).
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