The 5 Best War-on-Cash Stocks of the Past Decade

In less than a month, we will be looking at the 2010s in the rear-view mirror. The decade post-financial crisis will go down in the books as a bull market fraught with all sorts of uncertainty, but investors who stuck with it have been handsomely rewarded.

Investors in war-on-cash stocks -- companies that specialize in digital payments and transaction processing -- have been some of the biggest beneficiaries. E-commerce has played a big role in the advance, as have emerging markets where hundreds of millions of under-banked consumers have flocked to digital payment platforms for money management solutions. With 2020 right around the corner, here are the top five best-performing war-on-cash stocks, and what it means for investors in the next decade.

The top five war-on-cash stocks of the 2010s

All data as of market close Dec. 3, 2019. Data source: YCharts.  

Sitting atop the industry are Visa and Mastercard, both sporting massive gains that easily outpaced the S&P 500's total return (which includes reinvested dividends, as measured by SPDR S&P 500 ETF). The two firms were able to outpace the broader market in spite of their size as demand for their global payment and transaction processing networks surged higher. And the businesses are simple: When a transaction is processed on either network, a fee is charged. It's a powerful and highly profitable toll booth model that these two card issuers pioneered and have mastered.

Though neither company has ever been much of a dividend play -- Visa and Mastercard currently yield just 0.7% and 0.5%, respectively -- never underestimate the power of a rising payout. Visa grew its quarterly paycheck to shareholders by over 800% in the last decade, and Mastercard by nearly 2,000%. When reinvested, those cash infusions added dramatically to both stocks' total return.

With the big two out of the way, let's move on to the less familiar. Fiserv put up impressive numbers in the last 10 years with its technology and payment processing systems for merchants and financial institutions. Acquisitions have been a big part of that strategy. In 2011, the company took over money movement and account aggregation outfit CashEdge for $465 million; ATM and debit card management company Elan Financial Services for $690 million in 2018; and a massive all-stock $22 billion merger with merchant point-of-sale provider First Data early in 2019.

Acquisitions have been an important part of merchant point-of-sale provider Global Payments' growth as well. After several smaller takeovers in the years before it, Global acquired former rival Heartland Payment Systems for $4.3 billion in 2015. A handful of purchases later, the big $21.5 billion merger with Total System Services came, helping the two payment processors save on operating costs and combine forces to drive sales growth.

And finally there's Jack Henry & Associates, by far the smallest top performer here. The technology and computer systems provider for thousands of small banks, credit unions, and other financial institutions has benefited from the war on cash as consumers have steadily demanded more online access to their bank accounts and other financial services. Along the way, the firm has also made some deals, although nowhere near the scale as the megamergers and takeovers listed above. Although not a big dividend payer (currently a 1.1% annual yield), it has raised its cash cut to shareholders by over 360% in the last decade. When reinvested, the payday has raised the stock's total return by almost another 100%.

Other notable mentions

Consolidation of digital payment processing and networks was a notable theme in the 2010s. Another big one worth mentioning was Fidelity National Information Services' (FIS +0.00%) purchase of Worldpay in early 2019. Valued at $43 billion when including Worldpay's debt -- which itself was involved in a merger with Vantiv for $10 billion back in 2017 -- FIS' deal is currently in the record books as the largest in financial technology history. FIS' stock is up "only" 484% over the last 10-year stretch.  

It wasn't all mergers and acquisitions in the last 10 years, though. War-on-cash investors were treated to a few new stocks to choose from. eBay (EBAY 0.01%) spun off PayPal (PYPL +0.01%) over the summer of 2015, and Square (SQ +0.02%) had its IPO later that autumn. The two digital payment newcomers are both up triple digits since their debut, with PayPal sporting a nearly 200% gain and Square over 400%. Multiple e-commerce stores and tech giants have also gotten in on the action, launching payment processing  systems and other digital pay options to help consumers and merchants. 

Who will win the war on cash in the 2020s?

Even after a decade of huge returns, the war on cash isn't likely to end anytime soon. E-commerce -- that between businesses and consumers as well as business-to-business sales -- is still growing by double digits. Consumers in emerging markets continue to skip the bank and make use of digital money movement systems. The blockchain technology that underpins cryptocurrencies is also in the mix. Combined, those trends are creating a powerful tailwind with digital payment processors and digital systems. Various research reports expect digital payment volume to grow in the mid-teens percentage range for the foreseeable future.

The good news is that, after plenty of consolidation, there aren't that many war-on-cash stocks left. I recommend buying a little of each of the aforementioned stocks and letting them ride for the next 10 years -- if you have that kind of time to wait. The industry is still in flux, but all indications are that war-on-cash stocks have plenty of gas left in the tank.