Sunday, August 19, 2012

Mastercard (MA) 2012 Review

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. 

Mastercard (MA) 2012 Review
In addition, it manages a family of payment card brands (Mastercard, Mastercard Electronic, Maestro, Cirrus). 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 $18.70 in 2011 and its dividend from $.09 in 2006 to $.60 in 2011.

While the 2008-2009 pullback in global consumer spending impacted the gross dollar volume of transactions, the company continued to grow; further improvement should come as a result of:

(1) the global shift in the payments industry from paper to electronics,

(2) MA expands outside the US,

(3) innovation in its product portfolio [e-commerce, mobile commerce, pre-paid cards],

(4) a continuing stock buyback program.


(1) the global credit crisis has impacted growth negatively,

(2) difficulty controlling costs in a rapidly expanding business,

(3) lawsuits involving currency conversions and antitrust,

(4) tough regulatory environment.

Mastercard is rated A++ by Value Line, it has no debt and its stock provides a .3% yield.

Statistical Summary

Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2002
MA 0.3% 12% 5% 4*
IND 3.1 9 26 NA

Debt/Equity ROE EPS Down Since 2002 Net Margin Value Line Rating
MA 0% 32% 0 35% A++
IND 31 21 NA 17 NA

*MA has only paid a dividend for 6 years


Note: MA stock made great progress off its March 2009 low, quickly surpassing the downtrend off its June 2008 high (red line) and the November 2008 trading high (green line). Long term, the stock is in an uptrend (straight blue lines); intermediate term, it is in an uptrend---though it is currently right on its lower boundary (purple lines). The wiggly blue lines are Bollinger Bands. The Aggressive Growth Portfolio owns a full position in MA. The upper boundary of its Buy Value Range is $381; the lower boundary of its Sell Half Range is $546.

Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.