Western Union (NYSE:WU) Tuesday evening announced higher-than-expected fourth-quarter profits along with a surprise boost to its capital return program. The payment-services giant also laid out an ambitious forecast for the business in 2015 that was above Wall Street's expectations.  

Fourth-quarter results
But let's start with the quarter that just closed. Western Union's sales were flat, as expected, at $1.4 billion. After backing out foreign currency swings, though, revenue growth came in at a healthy 4%. Transaction volume was steady in its customer-to-customer business, while the smaller commercial services unit grew at a quicker pace. For the full year, Western Union managed growth in transactions and revenues in almost all of its geographic regions. Latin America was the only drag, probably thanks to currency moves. Revenues fell in that region even as transaction volumes ticked higher.

The real surprise came on the expenses side, where recent cost cuts supercharged profit growth this quarter. Operating costs fell 4% on roughly the same sales numbers. And the result was spiking profitability. Profit margin jumped from 17% to 20%. Those gains flowed to the bottom line as earnings climbed 35% to $0.42 per share. Wall Street was looking for a tamer 10% rise to $0.34 per share.

Capital return news
Better yet, management seemed confident that the efficiency gains will boost results from here on out. And the team expects to deliver most of the resulting free cash flow improvement back to investors. To that end, Western Union announced a 24% dividend hike to $0.155 per share, equating to an over 3% annual yield based on Tuesday's closing price.

The company also adopted a new share repurchase plan aimed at spending $1.2 billion over the next three years buying back stock. By comparison, Western Union is producing annual free cash flow in the neighborhood of $1 billion. In 2014 it returned $750 million to shareholders, mainly through stock buybacks. Today's news makes it likely that both capital return channels will grow this year.

Outlook for the year
For all of 2015, management expects results to look a lot like the quarter that just ended. Sales should tick slightly higher as foreign currency issues drag down reported revenue figures. Meanwhile, profit growth could be quite strong; operating profit margin is expected to climb to 21% from 20% in 2014.

Western Union should generate free cash flow of around $1 billon again this year, which will provide plenty of ammunition for management to keep delivering those growing cash returns to shareholders.

Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool recommends Western Union. 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.