With the post-recessionary economy now in full swing, consumers may be a bit more leery these days about running up their credit – and in some cases, so are the credit card companies. The three key players in the credit card industry are Mastercard Inc (NYSE:MA), Visa Inc (NYSE:V) , and Discover Financial Services (NYSE:DFS).
In many cases, consumers carry at least one or more of these cards in their wallets. And, while credit may make purchases convenient for users, shareholders of these entities have also brought in some financial rewards as well.
Discovering profit opportunities
Discover Financial Services (NYSE:DFS) offers both direct banking and payment services to individual and business consumers in the US. It also offers other consumer- banking products such as home loans, personal loans, private student loans, and prepaid credit cards. Over the past quarter, Discover’s revenue growth has outpaced – albeit slightly – that of the overall industry of just more than 4%.
The company’s quarterly revenue increased by 4.3% compared with last year’s second quarter. This revenue growth has likely been a major catalyst for boosting the company’s earnings per share.
Recently, Discover Financial Services (NYSE:DFS) signed contracts with 50 merchant acquirers. This deal will essentially extend the in-store acceptance of for PayPal – bringing this number in excess of 2-million merchant outlets by the end of this year.
Although Discover’s current debt-to-equity ratio is in the neighborhood of 2, investors have been well rewarded in that the company’s share price is up nearly 14% year-to-date in 2013 and more than 32% in the past year. And, while anything can happen in a volatile stock market, a cash-flow margin of almost 50%, and increased consumer spending with improving payment volume could help the upward momentum that Discover Financial Services (NYSE:DFS) has seen of late continue.
Following the leaders
Mastercard Inc (NYSE:MA) offers payment solutions to consumers, as well as payment and transaction-processing services to companies in both the US and internationally. The company is ironically headquartered in Purchase, New York.
Recently, Grammy and Emmy award winning star Justin Timberlake joined forces with MasterCard for a two-year deal that focuses on both brand collaboration as well as unique fan experiences for card users. These will include special performances by the singer himself, and they will also highlight the benefits of being a Mastercard Inc (NYSE:MA) cardholder.
MasterCard has also been a large proponent of Financial Literacy Month, adding PayPerks as a complimentary financial-education platform for all of the company’s Direct Express Debit Mastercard Inc (NYSE:MA) cardholders. The company’s Direct Express program is used by the United States Department of the Treasury in disbursing social-security payments, as well as veterans’ benefits and other types of federal payments electronically.
Mastercard Inc (NYSE:MA) also reported a 10% improvement in total international gross-dollar volume, with the majority of the gains coming from emerging markets. The strength in the international markets will enable MasterCard to propel its year-over-year sales growth rate up to 15% over the next four years.
While Mastercard Inc (NYSE:MA) pays a dividend of $2.40 per share, as computed with the company’s share price, investors only receive a dividend yield of 0.40%. So, for income-seeking investors, this stock may not be the ideal choice.