Monday, December 14, 2015

Ringing the register with MasterCard

Lost in the noise of the falling market this week was news that MasterCard Inc. decided to raise it's dividend 19%, and initiate a new $4 billion share buyback program. With that in mind I decided to finally add shares in one of the worlds leading payment processors and solutions provider.

I love getting a pay raise. Especially one that is way higher than just about any employer would give me on a yearly basis. MasterCard has been paying a dividend since 2006 and it's been generous with raising it ever since.  The company has averaged a 56% yearly gain in pay raises to investors since the dividend began.  While the overall yield is a little low the payout ratio has averaged between 15-22% in recent quarters leaving plenty of room for growth. Personally I see the company targeting a 30-40% payout ratio in the next 3-6 years.

Other things to love about the company is it's operating margin that comes in at 53%, and a net income profit margin of 39%. That's very close to it's peer Visa Inc. Additionally I love the balance sheet. The company has a current ratio of 1.58 and when I subtract Goodwill and Intangibles from Assets against Liabilities I calculate a ratio of 1.41. The higher the ratios the better the company is at managing it's debt and cash. Did I mention this is a Warren Buffet holding also?

MasterCard has been around since 1966 and it has come a long way since then.  MasterCard is benefiting from the same trends as Visa and American Express.  Societies around the world are slowly moving towards less cash within the economic system. No doubt the move is highly touted by the companies as it means more profits and deeper entrenchment into our daily lives. It's my belief that this trend is here to stay and MasterCard has built a dominate position it should easily be able to defend. I added the shares on December 11, 2015.  If you follow on Twitter you can get my updates during the day when I decide to add a security to the portfolio @LngHaulInvestor

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