According to a Federal Reserve payment study conducted in 2010, debit card usage grew by 15% annually between 2006 and 2009, so this market, especially overseas, is far from saturated.
It also might make sense for Visa to pick up one of the small but established names in the prepaid card sector, such as Green Dot Corporation (NYSE:GDOT). Green Dot Corporation (NYSE:GDOT) is in the process of diversifying the number of retailers it’s partnered with — as it used to be skewed heavily toward Wal-Mart Stores, Inc. (NYSE:WMT)— but will find the going tough if it needs to use its $358 million in net cash to promote its brand against the likes of American Express and Mastercard Inc (NYSE:MA). With NetSpend agreeing to be purchased by Global Payments Inc (NYSE:GPN), I see Green Dot Corporation (NYSE:GDOT) putting up the “For Sale” yard sign as the next logical step.
People buy what they know
Fourth, Visa was ranked as the 74th-most valuable brand, according to Interbrand’s 2012 list of the top global brands. What this means as a Visa shareholder is that the company’s brand image alone can drive investments into the stock. People want to own companies they’re familiar with and that they recognize, adding another reason Visa is a great candidate over the long run.
Shareholder payback is growing
Finally, Visa is offering a significant payback for investors — even beyond the 125% share-price appreciation seen over the trailing five-year period. In just its most recent quarter, Visa repurchased 12 million shares of its own stock and still has $1 billion remaining in its stock repurchase program. Although share repurchases don’t return money directly to shareholders, they can make a company appear cheaper on an earnings basis, since there are fewer shares outstanding to divide profits into.
In addition, Visa has raised its quarterly payout in each of the past four years by a cumulative total of 214%! Despite yielding just 0.8%, I think we’re seeing the beginning of a transformation throughout much of the credit services sector of these stocks becoming dividend juggernauts. With a payout ratio of just 18%, there’s certainly plenty of room for Visa to bump its dividend even higher without hampering its ability to expand into emerging markets, improve its network, or make acquisitions.
Are you charged up yet?
My suggestion is that you don’t let yourself be skewed by Visa’s high share price. With the amount of emerging-market opportunity yet to be tapped, and domestic and international prepaid cards beginning to take off in popularity, there’s no reason Visa can’t continue to grow by low double-digits for years to come. This is the epitome of a set-it-and-forget-it kind of investment that could singlehandedly charge up your portfolio!
The article 1 Long-Term Investment You Can Get Charged Up About originally appeared on Fool.com is written by Sean Williams.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of Facebook and MasterCard and recommends American Express, Coca-Cola, Facebook, MasterCard, Procter & Gamble, and Visa.
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