Nobody Owns Visa For the Dividend ... Right?

Visa shares offer a paltry 0.7% dividend yield, far below every other Dow Jones stock. Do income investors have any reason to own the credit card giant?

Feb 18, 2014 at 2:00PM

All 30 Dow Jones (DJINDICES:^DJI) members pay a dividend nowadays. Being a collection of high-quality businesses with equally well-respected stocks, you might expect to find some stellar dividend payers here. And you do -- but the Dow components don't march in total lockstep.

Visa Logo

Image source: Visa.

The smallest dividend yield on the blue-chip index today comes from recent addition Visa (NYSE:V). The credit card issuer offers a measly 0.7% yield, far below the Dow's 2.6% average yield and 31% below the second-thinnest Dow yield.

Do income investors have any reason at all to own this stock? It seems pretty obvious that the other 29 Dow shares offer higher yields and therefore should pay out stronger quarterly incomes to its shareholders.

But dividend investing isn't always that simple. Visa has plenty of mitigating factors that might make it attractive to a serious income investor.

For starters, Visa shares have tripled in price over the last three years. Meanwhile, the Dow gained 30%. Holding the dividend yield steady between 0.6% and 0.8% while the underlying share price is exploding like that is no mean feat.

V Dividend Yield (TTM) Chart

V Dividend Yield (TTM) data by YCharts.

Visa does this by boosting dividend payouts like clockwork. The company is committed to keeping its dividend policy ahead of rising share prices.

The second-weakest Dow dividend I mentioned earlier comes from fellow credit card specialist American Express (NYSE:AXP). These two stocks have a lot in common, but they took very different paths to arrive at today's seemingly disappointing payouts.

V Dividend Chart

V Dividend data by YCharts.

American Express shares bounced back strong from the 2008-2009 economic meltdown, just like Visa's did. But where Visa rewarded shareholders with a generous payout policy, American Express has barely boosted its dividend at all in the last five years. The result: American Express' yield plummeted from 6% to 1% while Visa held its ground.

Sure, American Express could always return to healthy dividend increases. But Visa never abandoned its generous payout strategy, even when things looked dark. Visa's short market history precludes it from becoming a true-blue dividend aristocrat for another 25 years or so, but I wouldn't be surprised to see it happen.

And that's a great way to build shareholder wealth in the long run.

Learn everything an income investor needs to know
One of the dirty secrets that few finance professionals will openly admit is the fact that dividend stocks as a group handily outperform their non-dividend paying brethren. The reasons for this are too numerous to list here, but you can rest assured that it's true. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.

Anders Bylund has no position in any stocks mentioned. The Motley Fool recommends American Express and Visa. The Motley Fool owns shares of Visa. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers