Consider adding actions from these kings of payment processing now
and Mastercard (NYSE: MA) are two of the biggest names in the digital payments industry. These global leaders have forever changed the way consumers, businesses and governments conduct financial transactions and are businesses that play a crucial role in the economy. While the pandemic has certainly had negative effects on each of their businesses, investors are starting to see encouraging signs that trading volumes are returning to normal.
This bodes well for these strong companies in the near term, and investors interested in the long-term growth of electronic payments should be very interested in building positions in Visa, Mastercard or both. There are plenty of reasons to consider adding shares of these payment powerhouses to your shopping list, but we’ve narrowed it down to 3 below.
Both companies just delivered earnings beats
Visa and Mastercard both have very similar business models and operate the largest and second largest electronic payments network respectively, which is why it’s a good sign that both have exceeded consensus estimates on their latest reports on profits. Let’s start with Visa, which beat the consensus estimate for first-quarter adjusted EPS of $0.11 with $1.81 on net revenue of $7.1 billion, up 24% year-on-year. ‘other. Visa’s quarter was particularly encouraging thanks to the way travel spending is rebounding and how the company is benefiting from growth in the e-commerce industry. These are trends that should continue to benefit the company in 2022 and beyond.
Mastercard also posted a strong fourth quarter profit to beat of $0.14 with adjusted EPS of $2.35 on net revenue of $5.2 billion, up 27% year-over-year. The company’s management team believes that Omicron will not harm long-term earnings, which is certainly a positive to consider. What’s perhaps most interesting about these two earnings beats is how investors reacted to the reports, as Visa and MasterCard stocks rallied strongly after the releases. Several analysts have also raised their price targets on these payments giants, which is another positive to consider.
The volume of cross-border transactions is improving
Cross-border transactions, which are financial transactions made by buyers outside their home country, are particularly important to the business models of Visa and Mastercard. This is because businesses are able to incur higher fees due to the added complexity of processing international payments. It makes sense that analysts and investors pay close attention to this metric every quarter, and another reason investors should be particularly intrigued by these stocks right now is the fact that cross-border trading volume is improving for both companies.
Visa reported that its cross-border volume grew 40% year over year in the first quarter, while Mastercard saw its cross-border volume jump 53% in the fourth quarter. These strong increases signal to investors that travelers are once again heading out into the world and spending money, and there’s a good chance these companies will see even stronger growth in the quarters to come once the threat of the latest COVID variant will begin to decline. Combine this “travel resumption” theme with the continued expansion of electronic payments networks and you have a recipe for a strong upside.
Commitment to rewarding shareholders
Finally, investors should consider adding shares of Visa and Mastercard at this time given that both companies are committed to rewarding long-term investors with dividends and share buybacks. Visa returned $4.9 billion in capital to shareholders in the first quarter, while Mastercard returned $1.7 billion in the fourth quarter. These companies generate a ton of excess cash every quarter that essentially heads straight into investors’ pockets, and it’s hard to imagine that trend changing anytime soon.
Mastercard shares currently offer investors a dividend yield of 0.51% and there are approximately $11.4 billion remaining in approved share buyback programs. On the other hand, Visa shares offer a dividend yield of 0.66% and have just authorized a new $12 billion share buyback program. The bottom line here is that it’s hard to find many companies offering the same combination of earnings growth potential, dividends and stock buybacks, which is another great reason to consider adding stocks. of these long-term quality companies.