Founded in 1966, Mastercard is a technology company that provides transaction processing and other payment-related products and services in the United States and internationally. It also provides information and analytics, consulting services, loyalty and reward programs. Its headquarters in Purchase, New York. This amazing growth machine comes in at #7 seven in our “Top 20 Dividend Growth Stocks.”
Mastercard Inc (MA) is ‘Second Class,’ failing 2 of 5 Dividend System criteria. It has ‘Premier’ status being in the upper percentiles of this month’s stock universe. The company increased dividends for 14 years, making it a Dividend Contender 10+. We consider MA to be a Growth stock.
GROWTH: MA’s 5-year average dividend growth rate is 24%, wonderfully high versus the dividend universe average of 12.4%. Free cash flow has grown at an average rate of 16.6% per year for the last 5 years versus the dividend universe at 8.3%, so MA is performing very well.
INCOME: MA’s current dividend yield is .48%, less than half of the average at 2.65%.
SAFETY: We use the Dividend Coverage Ratio to measure the dividend’s safety – higher is better. MA has a DCR of 4.1 which is very good, more than double the minimum of 2.
VALUATION: The price at time of analysis was $338.75, which we consider Overpriced. A fair price based on historical PE ratio and earnings would be around $185.79. The S&P500’s average PE ratio is 38.42, versus MA’s PE ratio of 52.93, 25% or higher than the S&P 500 average PE. Our ‘Value Rating’ for Mastercard Inc is .5 out of 5.0, meaning that both PS and PE indicate the stock is very expensive, compared to other dividend stocks available.
TIMING: Historical Yield and PE tell us that MA has ‘No ‘on-sale’ signal.’ Don’t eliminate a stock based on one factor (or lack thereof).
QUALITY: Our quality formula gives MA a ‘Quality Rating’ of 4.1 (out of 5), versus the average of 2.7 for this month’s dividend universe.
TOTAL RETURN: Over the last 15 years, the compound annual growth rate for an investment in Mastercard Inc was 34.37% per year with dividends reinvested, versus the S&P500 Total Return of around 11% per year for the same time period. As you can see, MA is doing better than the market with dividends reinvested.
Compared to all dividend stocks paying 7 years or more of increasing dividends, we rate Mastercard Inc a ‘A-.’
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