Thursday, September 13, 2012

Total System Services (TSS) 2012 Review

Total System Services, TSS, is a major processor of credit, debit and private label card transactions for institutions in North America.

TSS has grown dividends and profits at a 10-20% annual pace for the past 10 years earning a 15-20% return on equity. Despite a drop in revenue resulting from a tightening of consumer purse strings in the recent recession, management has structured a return to above average growth by:

(1) an improving economy leads to an increase in cardholder transactions,

(2) acquisitions [the company has a strong cash position],

(3) ongoing share buyback program,

(4) streamlining its operations and aggressive cost cutting.


(1) TSS is in a highly competitive industry,

(2) falling interest rates have a negative impact on income,

(3) new regulations may slower growth in cardholder accounts and higher operating costs.

Total is rated B++ by Value Line, carries a 4% debt to equity ratio and its stock yields 1.7%.

Statistical Summary

Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2002
TSS 1.7% 6% 28% 6
IND 2.0 9 26 NA

Debt/Equity ROE EPS Down Since 2002 Net Margin Value Line Rating
TSS 4% 18% 3 13% B++
IND 31 21 NA 17 NA


Note: TSS stock has made steady progress off its November 2008 low, surpassing the down trend off its May 2007 high (straight red line) and the November trading high (green line). TSS is in a long term trading range; the blue line is the lower boundary. However, it is an intermediate term up trend (purple lines). The wiggly red line is the 50 day moving average. The Dividend Growth Portfolio owns a 50% position in TSS. Shares would be Added at $12. The lower boundary of its Sell Half Range is $28.

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.