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Invest in Credit Card Dividend Stocks: Growth Rewards of Investing in MasterCard and Visa

Updated on June 8, 2012
Credit Card stocks like Visa and MasterCard are poised for long-term global growth.
Credit Card stocks like Visa and MasterCard are poised for long-term global growth.

Good Solid Choices for 2012 and Beyond

Credit card stocks like MasterCard and Visa are starting to look like smart long-term investments. Sure American Express (ticker: AXP) and Discover (ticker: DFS) for that matter are strong franchises, but Visa (ticker: V) and MasterCard (ticker: MA) are in another special category as the global transaction leaders. Discover may aspire to this level, and American Express has developed a unique niche based on its more affluent customers, but they don't have the mainstream dominance in our world commerce industry like the others. Invest in credit card stocks like MasterCard and Visa and keep them for long-term.

GLOBAL GROWTH

The interesting factors here for investors are the continuing global move away from cash, and the swelling credit card infrastructure in developing markets around the world. Clearly Visa and MasterCard will be the major beneficiaries of this growth. Google Wallet is creating quite a buzz for CitiMasterCard now, with Visa quickly behind them! And there is definitely a groundswell of additional activity to move us to new systems of instant payment using methods other than plastic - but I'm sure MasterCard and Visa will still be the transaction processors.

LET'S LOOK AT THE NUMBERS

In the table below we see data (from 9/14/11 - Yahoo Finance) that shows only the information we want to consider. (We don't really care about share price, just the stock's value!) First let's consider the overall size of the company: market capitalization is all outstanding shares multiplied by the stock price. This shows that largest to smallest: Visa, American Express, and MasterCard are all large cap stocks. Next we consider how much we pay for their earnings: price-to-earnings or P/E ratios for trailing twelve months and forward one year. Then next is the dividend yield - the income the company will share with you quarterly.

WHAT DOES THE INFORMATION TELL US: First that even though MasterCard has a big share price (well over $300 as of this writing), it is the 'smallest' company on our list. Both MasterCard and Visa seem fully valued for growth stocks, but cannot exactly be considered cheap. Their dividends are measly -- essential corporate board of director "marker dividends" to show that they will share, just not very much right now. Forward P/E looks interesting for Visa investors, but it's hard not to notice the stats for Amex!

LONG TERM PROSPECTS

Long-term MasterCard and Visa have room for global growth, and room to raise their dividends -- most likey rewarding investors both ways. On the other hand American Express is cheap at these valuations, and it remains a solid franchise, already sporting a decent yield, if you consider what banks are paying for savings and money market accounts.

For the long-term investor in 2012 and beyond all three of these stocks (MA, V, AXP) look interesting. If you hold them in an account where you can (DRIP) reinvest the dividends that you receive it would be even better! It's also likely that with their global transaction networks in place, they will still have a central place even if the purchasing device becomes something other than a credit card. (Think Mobil SpeedPass or even paying with your smart phone (iPhone or Droid!).

More food for thought: Legendary guru investor, the "Oracle of Omaha", Warren Buffett has been a long-term holder of American Express. His Berkshire Hathaway holding company started buying MasterCard in spring 2011. (And remember he routinely says that his favorite holding period is "forever'!)

As always do your own research before committing any risk capital to investing, and consult your own advisors, and financial professionals before making a purchase.

Closing Data from Yahoo Finance

 
MasterCard
Visa
American Express
Market Cap
42.85B
62.00B
58.48B
P/E Ratio (trailing)
20.90
17.46
12.72
P/E Ratio (forward)
16.18
15.72
11.78
Dividend Yield
0.20%
0.70%
1.50%
Comparison of the Big Three Credit Card stocks: MA, V, AXP (as of 9/14/2011)

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    • CapstoneTrends profile image
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      CapstoneTrends 6 years ago from Outside Boston, Massachusetts, USA

      Thanks Dream On.

    • DREAM ON profile image

      DREAM ON 6 years ago

      Very interesting and very detailed.Thanks for sharing.

    • CapstoneTrends profile image
      Author

      CapstoneTrends 6 years ago from Outside Boston, Massachusetts, USA

      Thanks Forexpulse

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