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Which Dividend Stock Is Best for You, Visa?



Which Dividend Stock Is Best for You, Visa

Investing in companies with an excellent track record of paying dividends makes sense if you’re a dividend investor. Once a list of companies with a strong dividend history has been assembled (such as ten or more years of consecutive payout increases), you can begin analyzing each stock to determine whether it makes sense for your portfolio. This is the point at which it becomes difficult to determine whether Visa (NYSE: V) is a worthwhile dividend stock. Here’s what you need to know.

Visa is an industry leader

The primary function of Visa is to handle retail purchase transactions. You can probably find its brand on a plastic card in your wallet because it is so well-known. Should that not be the case, you may notice a sign stating that Visa is accepted as payment on the walls of the shops where you frequent. Through the fees it levies on merchants, the corporation receives a tiny portion of every transaction made with a Visa-branded card. The company processes billions of dollars worth of transactions, but no single transaction has any significance. Those costs mount up.

Mastercard (NYSE:MA) and Visa are the two main competitors in the market. There is a duopoly between them in the transaction space. Although some smaller businesses have made an effort to enter the payment processing market, Visa’s expansion has not been hindered. For instance, in 2023 compared to 2022, the company processed 10% more transactions. The amount of transactions will fluctuate over time, partly as a result of economic activity, but the most important thing to remember is that Visa is a major player in the market and it doesn’t seem likely that it will be unseated anytime soon.

Visa’s dividend history is strong

That is the history of Visa’s 16-year dividend growth streak. Most importantly, there has been an enormous 18% average annualized boost over the last ten years. That’s not an anomaly either; the most recent hike occurred at a rate that is approximately equal to the trailing three- and five-year annualized increases, which were both approximately 16%. Thus, Visa has proven to be a very generous payout grower in addition to being a dependable dividend payer.

If you are an investor who seeks both growth and income or if your objective is dividend growth, you will likely find Visa appealing. For investors who want to extract as much profit as they can from their portfolios, there is a problem. Visa’s dividend yield is a pitiful 0.75%, which explains why. In contrast, the yield on the S&P 500 index is 1.3%. Using Financial Select Sector SPDR (NYSEMKT: XLF) as a proxy, the average yield on financial stocks, the industry from which Visa originates, is 1.5%. Put another way, most investors who prioritize income will not find Visa’s yield to be all that appealing.

That simply is; it’s neither good nor bad. The truth is that not every investor is a good fit for every stock. And if a company doesn’t align with your investment objectives, even excellent companies might be a bad choice.

If you want to increase your dividends, buy a Visa, but only then.

Visa is a profitable business that has a track record of increasing dividends to shareholders. However, the yield is so low that the shares are probably only attractive to dividend growth and growth-and-income investors. You will need to look elsewhere if you are looking for enormous dividend yields that you can live off of.

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