Thursday, September 08, 2011

MasterCard ( MA, Graph, Aggressive Growth Portfolio)

Mastercard (MA) is a global leader in electronic payments serving as a processor, franchisor and advisor to approximately 25,000 financial institutions for their credit, debit and other payment programs. 

In addition, it manages a family of payment card brands. Importantly, MA does not extend credit; it simply acts as a toll collector and is paid on both transaction volume and dollar volume.

The company earns in excess of a 25% return on equity and has grown profits from $1.76 in 2004 to $14.05 in 2010 and its dividend from $.09 in 2006 to $.64 in 2010.

While the pullback in global consumer spending impacted the gross dollar volume of transactions, growth should nonetheless continue as a result of:

(1) an aggressive cost reduction program,

(2) an increasing percentage of purchase transactions paid for by credit and debit cards

(3) MA expands outside the US,

(4) addition of new value added services.

(5) a continuing stock buyback program.

The primary negative is a continuing worldwide economic slowdown will impact transaction volume.

Mastercard is rated A++ by Value Line, it has no debt and its stock provides a .2% yield.

Statistical Summary

Stock Dividend Payout # Increases
Yield Growth Rate Ratio Since 2006

MA .2% 11% 3% 4*
Ind Ave 1.4 5* 25 NA

Debt/ EPS Down Net Value Line
Equity ROE Since 2004 Margin Rating

MA 0% 32% 0 35% A++
Ind Ave 35 16 NA 16 NA

*MA has only paid a dividend for 6 years


Note: MA stock made great progress off its March 2009 low, quickly surpassing the down trend off it June 2008 high (straight red line) and the November 2008 trading high (green line). MA is in a long term up trend (blue lines). The wiggly red line is the 30 day moving average. The Aggressive Growth Portfolio owns an 85% position in MA. Shares would be Added at $284; the lower boundary of its Sell Half Range is $440.