Visa Stock: 10,000-Foot View
1. Visa: The Company
Visa represents the largest payment network in the world, processing over $9 trillion worth of payments annually. Although the company does not issue Visa cards, approximately 3.5 billion debit and credit cards display the Visa logo.
Operating in 200 worldwide locations, Visa operates several subsidiaries, including Visa USA, Visa Canada, Innovant, CyberSource, and Visa Worldwide. Its processing network, called VisaNet, facilitates payment transactions for 2.5 billion Visa cardholders.
2. What the Analysts Recommend
If you plan to invest in Visa, purely for income, you will be disappointed, as the stock is better held for its long-term capital gains.
Nevertheless, if your investing radar is picking up buy signals, you should still pay attention, as the stock is a great portfolio addition for investors. More on that below.
3. How Visa Makes Its Money
The company makes most of its money by charging transaction fees for each purchase made by Visa cardholders. The fees include:
1. A service fee, based on the size of transactions
2. A data processing fee, paid for authorization, settlement, and clearing of transactions. The amount depends on the operations performed.
3. An international fee, charged when a Visa cardholder uses his or her card in a country outside their own. This fee primarily covers currency conversion.
Visa is known for its high operating margin, which, in Q4 of 2020, was just over 50%. Usually, a margin of 20% is considered attractive.
Visa’s operating margin surpasses other major titans of industry, such as Microsoft (around 43%), Tesla (about 9%), and Amazon (almost 6.5%). The NYSE ticker for Visa is the single letter V. It joins the ranks of other single ticker companies, such as Citigroup (C), Kelloggs (K), and Hyatt (H).
Does Visa Pay a Dividend and When Is It Paid?
Yes, Visa pays a dividend, which is disbursed 4 times per year – in February, May, August, and November.
What’s the Dividend on Visa?
Visa pays a yearly dividend of $1.28 per share, producing a dividend yield of 0.55%.
During the last 12 consecutive years, the dividend, on average, has increased 20.92%. The giant credit/debit card processor pays out just over 25% of its earnings for shareholder dividends. It invests the rest in buy-backs.
Is Visa a Good Dividend Stock?
Yes, Visa is a good dividend stock – not at the top of list, but certainly a great company in which to invest your money. You cannot ignore the benefits that support it.
If anything, the COVID pandemic gives you reason enough to place your sights on Visa. While Visa revenue did drop 17% year-on-year (YOY) and almost 30% for cross-border transactions during Q4 of 2020, Visa’s other processing activities enabled the company to bounce back.
Visa’s fiscal earnings plunged 23% during Q4, 2020. However, processed transactions went up 2%, resulting in Visa’s earning per share price to come in at $1.12 versus the $1.09 per share projection. Overall, Visa’s stock price rose 3.2% from July through September for the period.
In light of the difficult economic backdrop, it’s hard to disregard Visa’s financial stability – that the company weathers a storm (one of tsunami proportions) very well.
This can be seen by the company’s purchase of buybacks during 2020. Visa spent $5.3 billion on share buybacks during the height of the COVID-19 crisis and $10.9 billion on buyback purchases in 2019. These large repurchasing activities influenced Visa’s share price this year.
Reaffirming its dividend in 2020, Visa increased its payout for the quarter by 6.7%, resulting in a $1.28 annual yield.
Is Visa Overvalued?
One thing that compensated for cross-border losses for Visa was online purchases during the pandemic. It’s not a stretch to conclude that Visa’s armor is strong in this regard.
However, one risk factor investors should consider is valuation. Lower V share prices in the future wouldn’t be a surprise given the company is closing in on fair value.
With that said, you have to also understand why Visa’s valuation is higher. Unlike most credit card issuers and banks, the giant electronic card processor is safeguarded against loan default risks. As a result, Visa’s valuation across the financial sector is elevated.
In short, when it comes to risks, Visa ranks low relative to most of its competitors.
Is Visa Stock A Buy?
From the above review, it is still safe to say that Visa stock is a buy. Per CNN Money, a poll of 35 financial analysts showed a 12-month forecast for Visa of $228. Respondents unanimously voted that Visa was a stock buy. Yahoo Finance stock experts also agreed that Visa is a strong buy.
However, not everyone is so jubilant about buying Visa stock, with some traders more cautious. For example, MarketBeat advisors project a 12-month forecast of $220.20. However, this price prediction still makes Visa a no-holds- barred stock pick.
Given this information, it’s clear that Wall Street analysts’ sentiment has positive tailwinds. Investment funds hold about 50% of Visa shares, further testament to the stock’s long-term possibilities for growth.
1. Add Visa to Your Portfolio for Long-term Growth
When you ask, “Is Visa a good dividend stock?” keep the term, “long-term” in mind. Don’t expect the stock price to jump through the roof in 2021.
However, if you seek to trusted brand-name stock for the long haul and, to a lesser degree, want reasonably good dividends, you could certainly buy Visa stock with confidence.
2. Remember: “Patience Is a Virtue”
When investing in Visa, “Patience is a Virtue.” This isn’t a company that will bolt higher most likely due to its size but it could steadily march north over time, with the usual downward swings to test investor resolve.
When buying Visa, consider its P/E ratio too.
*The price-to-earnings (P/E) ration is figured by taking the latest closing price for a stock and dividing it by the earnings per share (EPS) number. Therefore, the P/E ratio gives you the information you need to determine whether any stock is overvalued or under-valued.
Yes, many financial forecasters regard VIsa as a Buy or even a Strong Buy for stock traders. However, you may want to wait to see if the stock dips in price or its P/E drops before rushing to purchase it.
“Is Visa a good dividend stock?” Again, Yes it is. Right now, it is in the buy zone. However, if you wish to experience increased benefits from your investment, you may want to keep it on your Watchlist and buy it when the P/E or price go down a bit.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.