Achieving market-beating investing results requires buying great companies and holding for the long term. Getting in on an initial public offering (IPO) gives investors the chance to get into a stock on the ground floor. Mastercard (NYSE:MA), a global payments processor, is a textbook example of how buy-and-hold can lead to outsized investor returns.

Let's look back at its go-public financials and find out how much Mastercard's IPO investors have benefited by holding its stock.

Starting out on the right foot

When this global payments processor filed its paperwork to go public in May 2006, its little plastic cards were already accepted in 24 million locations worldwide. Its financial stats for the prior two years were pretty amazing, too.


Full-Year 2004

Full-Year 2005



$2.593 billion

$2.938 billion


Net income

$0.238 billion

$0.266 billion


Gross dollar volume

$1,467 billion

$1,661 billion


Processed transactions

12.2 billion

13.7 billion


Source: Mastercard's S-1 (filing to go public) Table by author. 

Combined with a balance sheet that includes over $1 billion in cash and investable securities and only $229 million in debt as of March 31, 2006, the company financials were rock solid.

The stock's IPO was priced at $39 and an investment of $1,014 would have bought 26 shares. But before we calculate the returns on these shares, let's look at how Mastercard has fared since then.

The years as a public company

Coming into its teenage years as a public company, Mastercard is still dazzling investors with year-over-year revenue growth of 15% and a 21% increase in earnings per share as of the most recent quarter. The company clocked in almost $16.3 billion in trailing-12-month revenue and $6.9 billion in net income, both figures are many times higher than its 2005 results.

MA Revenue (TTM) Chart

MA Revenue (TTM) data by YCharts.

With all of the competition in the war on cash, the company isn't resting on its laurels either. Mastercard has gobbled up a number of smaller companies that add additional services, including real-time automated clearing house (ACH) payments, cross-border transactions, and artificial intelligence for fraud detection.

Mastercard had built a tremendous moat, its business is growing, and stockholders are sharing in its success.

The returns and more

Quiz time: Which do you think was a better investment, Mastercard at its IPO or Apple stock bought on the same day -- May 25, 2006? Keep in mind that back then no one knew that Apple was secretly working on its first iPhone that would be released 13 months later. Got your answer?

The better investment, by more than double, was Mastercard. Surprised? I certainly was.

Apple stock closed at a split-adjusted $8 that day and is now trading around $266, a fantastic 33-bagger. But Mastercard's results are even better. Accounting for the 10-to-1 split in 2014, the now 260 shares of Mastercard at today's price of around $278 would be worth $72,280, or an incredible 71 times the original investment. These market-trouncing results averaged 37% annual returns. Astounding.

A large pile of $100 bills.

If you invested in Mastercard's IPO in 2006, you would have a big pile of money today. Image Source: Getty Images.

But wait, there's more. Dividends have been a small but ever-increasing payout for shareholders every single quarter since Mastercard's been public. This initial $1,014 investment would have yielded $1,471 in dividends over its lifetime. Not too shabby.

The lesson for investors

There are two parts to the long-term buy-and-hold strategy that need to function properly to make an investment work. First, the buying part. You might think that if you didn't get in on the IPO, that you've missed out and thus avoid buying in. But in this case, that would have been a huge mistake. Becoming a Mastercard shareholder at almost any point in the last 13 years and holding to today would have created a market-beating position in your portfolio.

For some investors, it's the holding-for-the-long-term part that's hard. It can be especially tempting to sell out of a stock that has doubled or even tripled in value. But this example shows how letting your winners run can sometimes hand investors a big-pile-of-money result.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.