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
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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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

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