Top Dividend Growth Stocks — #6 Visa

We’ve been counting down the “Top 20 Dividend Growth Stocks” — coming in at #6 is the amazing Visa, Inc. One of the first freestanding “credit cards,” Visa was founded in 1958 and is headquartered in San Francisco, California. It is a digital payments technology and analytics company with operations worldwide. It has had spectacular growth!

Visa Inc (V) is Fully Certified, passing ALL Dividend System criteria. It has ‘Premier’ status being in the upper percentiles of this month’s stock universe. The company increased dividends for 12 years, making it a Dividend Contender 10+. We consider V to be a Growth stock.

GROWTH:  V’s 5-year average dividend growth rate is 20.6%, wonderfully high versus the dividend universe average of 12.4%. Free cash flow has grown at an average rate of 18.5% per year for the last 5 years versus the dividend universe at 8.3%, so V is performing very well.

INCOME: V’s current dividend yield is .58%, 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. V has a DCR of 3.6 which is good, exceeds the minimum requirement of 2. 

VALUATION: The price at time of analysis was $208.77, which we consider Overpriced. A fair price based on historical PE ratio and earnings would be around $148.35. The S&P500’s average PE ratio is 38.42, versus V’s PE ratio of 43.23,  around from 1% to 25% over the S&P 500 average PE. Our ‘Value Rating’ for Visa 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 V has ‘No ‘buy’ signal.’ Don’t eliminate a stock based on one factor (or lack thereof). 

QUALITY: Our quality formula gives V 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 Visa Inc was 21.08% 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, V is doing better than the market with dividends reinvested.

Compared to all dividend stocks paying 7 years or more of increasing dividends, we rate Visa Inc a ‘A-.’

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So, what do you think of Visa? What’s in your wallet?

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