The dividend growth of any company depends on its financial health or the profit it generates and the part thereof it pays as dividends to its stock holders. Growth of dividends seems promising to the stock holders as it reflects the institution’s financial soundness. Visa Inc. (V, Financial) has shown steady growth of business and consistently increasing profits in the past six years and has the stage set for achieving greater pinnacles of financial success in times to come. Let’s check in to find out further what future Visa Inc. is set to witness in the forthcoming days.
Huge potential for growth of Visa and competitors
The advent of ecommerce is replacing cash with cards in a big way with payment processing services playing a pivotal role in facilitating commercial transactions. Many companies have formed retail electronic payment networks and floated their credit and debit cards to people across the globe, charging a nominal fee at every swipe of the card and thus earning from each transaction. With more and more people resorting to the use of these cards, they are increasingly replacing cash transactions and usage of cheques, thereby, expanding the scope of business and profits tremendously for various global retail electronic payment networks. Visa Inc is a name to reckon within this field, with Mastercard Inc. (MA, Financial) holding the position of a prominent competitor. Together these two networks are currently covering almost 85% of the total retail electronic payments taking place across the globe, the other competitors being American Express (AXP, Financial) and Discover Financial Services (DFS, Financial).
Visa Inc. has been consistently expanding its operations as a retail electronic payment network, with Visa Cards getting popular with people across the world. The merchants and individual consumers, financial institutions, private business and government bodies, carry on their commercial activites depending on the provision of value and information provided to them by electronic payment networks, like Visa, Master Card, Amex and Discover. The services include retail payments, providing credits, debits, mobile, digital and prepaid payments. Providing cash in different currencies through ATM services has been undertaken by Visa Inc. in more than 200 countries in the world. Keeping in view the people’s increasing awareness of the utility value of cards and the safety it ensures against frauds for the consumer and the assurance of payment granted to the purchaser, there is immense potential for growth of business and increased earnings for the company, consequently attracting investors to buy shares.
Dividend payouts since being listed
Visa Inc. went for the initial public offering in the year 2008. Since then there has been a steady enhancement in dividend payment or yield of dividends by Visa to its stockholders. The company has also been buying back its shares whenever the need has arisen, which is indicative of its strong footing financially and also higher dividend value to the existing shares in stock. On Nov.10, 2011, the volume of stocks amounted to $1,084 million as compared to $686.58 million on Sept. 3, 2014. The quantum of shares has been significantly reduced due to the buy back policy of the company. The shares bought back by the company are retired to the treasury, to be treasury stocks.
The net quarterly GAAP income of the company has been declared to be $1.1 billion for the fourth quarter of 2014 with earning per share standing at $1.72 a share, and the dividend paid was $0.40 a share. The dividend declared was on conservative lines and may not seem to be very attractive at the outset, but in the long run could prove highly beneficial, as the company is passing through its period of growth with an extensive scope for expansion. Unlike companies like Coca-Cola (KO, Financial), McDonald’s (MCD, Financial) and Johnson and Johnson (JNJ, Financial), who are now giving a steady return having gone through the phase of growth to reach a point of financial maturity, Visa Inc. has been a dividend payer during the phase of growth. Remarkably, the dividend payout has improved from $0.105 per share as of November 2008 to $0.48 a share as of October 2014 which shows that the dividend has been phenomenally stepped up by the company within the past few years following the IPO.
Visa is still young, has a large market to capture to multiply its clients and expand its area of operation. Also with e-commerce gaining popularity across the globe, Visa has a lot more to do.
Final thoughts
Purchasing shares of Visa Inc., investing money with the company will soon bring lucrative dividends. It is indeed a safe bid for the investors. The company may face tough competition from the other retail electronic payment networks, who would also rise to the occasion in their best efforts to exploit the ever-increasing market of people opting for use of cards facilitating electronic payments in their day-to-day financial transactions. Digital and payments through mobiles will also offer competion.
The office bearers at San Francisco in California are well aware of these business hurdles and are already chalking out a strategy to overcome these hazards. Keeping in view the facts stated above, Visa dividend growth future appears to be bright at present, and bears a promise of a profitable blast in times to come. Buying Visa shares at present would undoubtedly prove to be a wise investment.
