This Credit Card Giant Is Delivering for Shareholders

Although MasterCard's latest earnings report was a disappointment, the company continues to find ways to increase shareholder value and remain one of the most intriguing long-term growth investments.

Feb 21, 2014 at 7:00AM

A rare event happened a few weeks ago. Credit card giant and payments industry leader MasterCard (NYSE: MA) reported earnings and missed on both the top and bottom lines. The disappointing results stood out in particular because rivals American Express (NYSE: AXP) and Visa (NYSE: V) both reported rather well in recent weeks.

However, the company is still riding one of the strongest growth stories in recent memory and remains completely dedicated to increasing shareholder value. Accordingly, the company currently represents one of the most attractive long-term investments and investors looking to gain exposure to the payments industry should consider buying shares of MasterCard on weakness.


Source: Company Website.

Earnings miss but growth is still intact
In terms of revenue and earnings per share estimates, MasterCard's latest report was a slight disappointment. The company's fourth-quarter revenue of $2.13 billion barely missed the consensus estimate of $2.14 billion. However, the company's fourth-quarter earnings per share of $0.57 missed by a wider mark the $0.60 consensus estimate. 

Despite the disappointment, both reported numbers represent solid growth for the payments juggernaut on a year-over-year basis. Revenue grew an impressive 12% from the comparable quarter in 2012 or 11% on a constant-currency basis. Earnings per share increased even more, rising 16.32% from the same quarter in 2012.

Does this look disappointing?
Despite the earnings disappointment, MasterCard is still expected to be the industry growth leader in 2014. The following is a breakdown of MasterCard's projected growth in 2014 compared to rivals American Express and Visa: 

CompanyRevenue Growth 2014EPS Growth 2014
American Express 5.6% 11%
MasterCard 12% 17.6%
Visa 9.8% 17%
*Visa fiscal year ends in September

MasterCard is projected to lead its two main competitors with regard to both revenue and EPS growth in 2014. However, all three companies are projected to grow very well and this indicates just how strong the global growth story is for the major payments industry leaders.

MasterCard remains committed to shareholders
As if the company's solid growth wasn't enough, management at MasterCard has demonstrated numerous times over the years it is dedicated to increasing shareholder value. In many ways, the company has executed better than its main rival Visa as of late.

The company's recent announcement that it was increasing its dividend by a staggering 83% is the first example. Not only is the increase substantial, it follows a previous dividend increase of 100% which was announced just in February of last year. Also, it represents a much more robust increase compared to Visa's most recent dividend raise of 21% in October.

Also, MasterCard management approved yet another massive stock buyback. The company's recently announced $3.5 billion stock repurchase program will go into effect after the existing $2 billion buyback ends. The best part is that, like the dividend increases, Mastercard's buybacks are now becoming more consistent. It is my assessment that shareholders can continue to expect dividend increases and buybacks at consistent intervals from MasterCard going forward.

CEO Ajay Banga said about the recent efforts to increase value, "Today's actions reflect our ongoing commitment to deliver shareholder value as well as our confidence in the long-term growth and financial performance of our company." 

And finally, management announced late last year that the company would split its shares 10-for-1, increasing the total shares outstanding from 120 million to 1.2 billion.  The split, which took place on January 21, makes the company's stock more accessible to retail investors, especially ones that may have been reluctant to buy a stock trading near the intimidating $1,000 price per share level. On the contrary, Visa's shares have never been split and now trade at almost three times the price per share that MasterCard's shares trade at.

Buy the dip and charge ahead
It is not often MasterCard shares drop significantly after an earnings report. As expected, investors bought the dip and shares have recovered nicely so far. The reason is simple; there is no stopping the world's shift away from cash and toward electronic forms of payment. MasterCard, along with rivals American Express and Visa, are positioned well to capitalize on this ongoing, worldwide consumer trend.

However, with industry-leading growth and a steadfast approach to increasing shareholder value, MasterCard remains my top pick in the payments solutions space and a great long-term buy on current weakness.

A big risk to credit cards?
The plastic in your wallet is about to go the way of the typewriter, the VCR, and the 8-track tape player. When it does, a handful of investors could stand to get very rich. You can join them -- but you must act now. An eye-opening new presentation reveals the full story on why your credit card is about to be worthless -- and highlights one little-known company sitting at the epicenter of an earth-shaking movement that could hand early investors the kind of profits we haven't seen since the dot-com days. Click here to watch this stunning video.

Philip Saglimbeni owns shares of MasterCard. The Motley Fool recommends American Express, MasterCard, and Visa. The Motley Fool owns shares of MasterCard and 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

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.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

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. It's also featured on several dozen 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 ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers