Basking after a good fiscal third quarter, the board of Visa Inc. (V) made yesterday eventful by announcing a 47% hike in its regular quarterly dividend, thereby inflating shareholder value.
Accordingly, the leading card payment processing company’s regular quarterly dividend surged to 22 cents from 15 cents paid until the last quarter. At this rate, the annual dividend payout will improve to 88 cents from 60 cents.
The hiked dividend is payable on December 6, 2011, to all the class A, class B and class C shareholders of record as on November 18, 2011.
This marks the third consecutive hike in the past three years, since Visa went public in 2008. Previously, the company had increased its dividend by 20% in October last year. This was backed by about a 19% increment in 2009, where the annual dividend had escalated to 50 cents from 42 cents.
Visa’s dividend hike has come just ahead of its fiscal fourth quarter and annual 2011 financial results, scheduled to release after the market closes on October 26, 2011. The company’s board had also sanctioned a new $1.0 billion share repurchase program during its fiscal third quarter of 2011, which is expected to expire on July 20, 2012. Visa also bought back $1.1 billion worth of stock in the previous quarter.
Despite the challenging economic and regulatory environment, Visa has consistently outperformed its peer group, primarily arch-rival MasterCard Inc. (MA), through a healthy product boutique and huge network expanse. The company drives its operating and competitive leverage through portfolio diversification and expansion into novel pastures. Visa persistently explores new technological, processing and service platforms to facilitate more convenient and innovative payment method such as money transfer, mobile and prepaid payments along with eCommerce.
Moreover, the company continues to drive growth through increased payment volumes along with consistent growth in processed transactions. Visa benefits from strong secular demand growth, meaningful international exposure and improved card spending along with high barriers to entry, excellent pricing power and impressive operating leverage.
Overall, these growth drivers have not only helped Visa offset the economic and regulatory risks but have also boosted earnings growth, thereby recording higher operating cash flow of $3.0 billion at the end of third quarter of fiscal 2011. This appears scope-driven to support the company’s efficient capital deployment through strategic acquisitions and alliances, stock buybacks and dividend payouts, which in turn delivers higher value to its shareholders and retains their confidence.
Visa’s growth potential is reflected in its earnings growth guidance of above 20% growth for 2011, while outperforming the above 20% outlook in fiscal 2010. Although the regulatory turmoil is expected to drive down growth in 2012, we believe that Visa has the power to recover within a year’s time.
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VISA INC-A (V): Free Stock Analysis Report
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