Visa Inc. is a global payments technology company providing electronic payment solutions to its clients worldwide. It is one of the largest retail electronic funds transfer networks used globally. Visa provides transaction processing services through its global processing platform, VisaNet, payment products and other value-added services to its clients. In addition, the company has adopted new digital payment and security technologies, such as contactless and tokenization.
The company has a presence in more than 200 countries and territories worldwide. More than 188 billion global transactions are processed through VisaNet each year. VisaNet is Visa Inc.’s reliable and secure processing system, which has supported the company’s growth across the world. A majority of credit and debit cardholders in the U.S. prefer Visa and there are 3.3 billion Visa cards in use today. Most of its clients are consumers, businesses, banks and governments.Investment Data
- Opportunity Score: 60
- Ticker: NYSE:V
- Sector: Financial Services
- Industry: Credit Services
- Market Cap: 431.13B
- P/E: 38.53
- Dividend Yield: 0.59%
- Payout Ratio (Earnings): 22.81%
- Chowder Score: Members Only
- Revenue Growth: Members Only
- Dividend Growth: Members Only
- Dividend Growth Fit: 10/10
- Dividend Income Fit: 5/10
Revenue Growth & Market Exposure
With over six decades of experience in this field, Visa has successfully built an extensive footprint extending to every corner of the world. The company has developed strategic relationships with clients and partners globally and continues to enter into new partnerships and agreements to maintain its leading position in the digital marketplace.
Visa operates one of the most sophisticated payment processing systems in the world and connects people worldwide through its innovative payment solutions. The company has become a trusted payments partner and has built a large base of loyal customers worldwide. When it comes to digital payments, it is not very comfortable for people to easily share their personal information, especially in developing economies where people are still getting started with the digital payment trend. Visa develops and continually invests in technology to enhance the consumer experience and security, and develop innovative products.
The company experienced double-digit growth in important performance metrics such as payments volume, cross-border volume and processed transactions during the last year. In order to create a faster and more convenient experience for its clients, Visa introduced contactless, scan-to-pay and Secure Remote Commerce (SRC). The contactless payment system is gathering significant traction in the U.S. market and Visa stands a good chance to benefit from this trend.
Visa is also growing through acquisitions. Visa Europe, the key payments bank in Europe, is one of its largest acquisitions leading to the creation of a single large global company. Major economies around the world are going cashless, and Visa through its omnipresence is well positioned to lead this digital transformation. The company is expecting its annual net revenue growth in the low double-digits on a nominal basis (excluding the impact of foreign exchange).
Visa has a history of paying dividends regularly to its shareholders. The company last raised its dividends by 19% and has a current dividend yield of 0.6%. Visa is a dividend achiever and has compounded its dividend annually at 20% CAGR over the last five years. Its payout ratio is also very low at 20%. The company also offers an attractive share buyback policy. Given the continued growth in global e-commerce trade, Visa should continue growing its top line comfortably. The company has projected its 2019 revenues to grow in the low single digit rate which should aid in continuing its dividend payment streak in the future.
The company’s relentless focus on strengthening its core assets, network, brand, and security should improve its operating efficiency and margins, and maintain its customer trust. The Visa network continues to grow manifold with more than 3.3 billion card users and 54 million eligible merchant locations. It is poised to even grow stronger and larger as futuristic technologies such as IoT enabled cars, homes and workplaces become mainstream in the near future. Visa has registered a growth of 33% CAGR in its EPS over the last decade.
Visa is in a good position to drive its future growth by strengthening its core business solutions, credit, debit, and prepaid products, as well as its global ATM network. A robust business model, a global distribution network, strong client partnerships and a powerful brand are Visa Inc.’s strong competitive strengths. Increasing consumerism and deeper penetration of smart connected devices act as strong tailwinds for the company.
Visa Inc. competes with emerging as well as existing competitors such as MasterCard, American Express, Discover Financial Services, JCB and UnionPay. It competes against all forms of payment including paper-based payments, primarily cash and checks, as well as electronic payments.
Visa faces intense competition from global and local networks, alternate payment providers, payment processors, and other electronic payments network. Security, convenience, speed, and reliability are Visa’s strong competitive advantages.
Given its large geographic reach and an impeccable reputation, Visa stands a good chance to benefit from the rapidly growing e-commerce industry and increasing trends of digitization worldwide. As a leading solutions provider in digital payments, the company should continue to benefit from its portfolio of innovative products and solutions driving future value creation for its shareholders.
Visa is one of my largest holdings. Even with the low dividend yield, it has a place in my portfolio. Historically, I would not have seen a stock with such a low yield but with the Chowder Score, I can see them now. Look at the stock performance, Visa is leaving the indexes in the dust.
DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.