Last update on 2024-06-27

Mastercard (MA) - Dividend Analysis (Final Score: 4/8)

Mastercard (MA) Dividend Analysis reveals a well-covered, stable growth in dividends despite inconsistencies, achieving a score of 4 out of 8.

Short Analysis - Dividend Score: 4

We're running Mastercard (MA) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Mastercard's dividend policy was assessed using an 8-criteria scoring system, resulting in a score of 4 out of 8. The analysis revealed the following key points: 1. Dividend Yield Evaluation: The dividend yield was not higher than the industry average, suggesting limited income attractiveness. 2. Dividend Growth Rate: Inconsistent with significant yearly fluctuations, indicating instability. 3. Payout Ratio: Favorably low average payout ratio of 14.77%, showing strong earnings retention. 4. Earnings Coverage: Dividends are well-covered by earnings, with more stability from 2012 onwards. 5. Cash Flow: Sufficient cash flow to cover dividends, ensuring sustainability. 6. Stability of Payments: Exhibited stable dividend payments without major drops, indicating reliability. 7. Duration: Consistent dividend payments for 17 years, short of the 25-year benchmark. 8. Stock Repurchases: Reliable history of repurchasing shares, beneficial for shareholders.

Insights for Value Investors Seeking Stable Income

Mastercard shows potential for dividend sustainability with a strong payout ratio and stable earnings coverage. However, the inconsistent dividend growth and the dividend yield's underperformance against the industry average may raise concerns. For investors seeking reliable income and long-term growth, Mastercard's consistent dividends and robust share buyback strategy make it worth considering, especially if growth stability improves.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

dividend yield and why it is important to consider

Analyzing the dividend yield, which is a measure of the annual dividends paid out as a percentage of the share price, helps investors assess the profitability of holding the stock relative to its current market value. A higher yield suggests more income for the investor, assuming other factors remain constant.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate measures how much the dividend payments have increased over a specific period. It helps investors gauge the company's dividend policy and its commitment to returning value to shareholders.

Looking at the provided data, not all years have a dividend payout. However, for those years that do, the percentages vary significantly, indicating irregular growth. Notably, the dividend growth rate soaring above 500% in certain years and dipping negative in others reflects instability. The high average dividend ratio of 63.43% suggests that when dividends were paid, they were generally substantial. However, the inconsistency presents a red flag in terms of sustainable and predictable shareholder returns, making the overall trend less favorable.

Average annual Payout Ratio lower than 65% in the last 20 years?

The average payout ratio is the percentage of earnings paid to shareholders in dividends. Keeping it below 65% ensures the company retains enough profit for growth and stability while rewarding shareholders.

Mastercard has an average payout ratio of 14.77% over the past 20 years, which is significantly below the 65% threshold. This trend indicates strong earnings retention, ensuring sufficient reinvestment into business growth and operational stability. The variability in yearly payout ratios, such as the spike to 81.87% in 2013 and the negative payout in 2008, suggests responsive financial strategies to market conditions. Consistently low payout ratios sustain financial flexibility and attractiveness for growth-oriented investors.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings.

Between 2003 and 2023, Mastercard's Earnings per Share (EPS) saw fluctuations, particularly in the early years and during some periods (like 2020). Meanwhile, Dividends per Share (DPS) steadily increased over time despite the variations in EPS. Mainly from 2012 onwards, EPS grew significantly as well. The ratio of dividends covered by earnings varies greatly but is mostly positive and relatively stable in more recent years. With DPS usually being a fraction of EPS, these figures suggest that dividends are well covered, ensuring sustainability, albeit with minor fluctuations. The general uptrend in EPS enhances confidence in this trend being good.

Dividends Well Covered by Cash Flow?

Explain the criterion for Mastercard (MA) and why it is important to consider

Dividends being well covered by cash flow indicates that a company is generating sufficient cash to not only sustain its operations but also return funds to shareholders. This parameter is crucial as it evaluates the sustainability of dividend payouts, and consistently low coverage ratios might hint at potential liquidity problems.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments, where the dividend per share did not drop by more than 20% over the past two decades, is vital for income-seeking investors. Consistency ensures reliable income.

Mastercard (MA) has displayed an impressive track record in dividend stability over the past two decades. Analyzing the dividend per share (DPS) from 2003 to 2023, we observe a CAGR in dividends. For example, from 2006 to 2023, the DPS grew from $0.009 to $2.28. Moreover, there is no instance of a DPS drop by more than 20%. This consistent growth trajectory, even during economic downturns such as the 2008 financial crisis, showcases Mastercard's robust financial health and operational resilience. This is a highly positive trend for income-seeking investors, underscoring the reliability and sustainability of dividend payments.

Dividends Paid for Over 25 Years?

Consistency in dividend payments is essential as it reflects a company's long-term financial health and its commitment to returning value to shareholders.

Mastercard (MA) has shown a consistent ability to pay dividends over the years. Starting in 2006 with a minuscule $0.009 per share, the company has steadily increased its dividend payments, reaching $2.28 per share in 2023. This upward trend in dividend payments over the past 17 years is a positive sign. However, it falls short of the 25-year mark that would make Mastercard a candidate for the esteemed 'Dividend Aristocrats' club. Nonetheless, MA's ability to increase its dividends consistently showcases its strong financial performance, stability, and shareholder commitment. The substantial dividend growth rate, especially from 2013 onwards, is particularly commendable, reflecting robust earnings and a solid balance sheet.

Reliable Stock Repurchases Over the Past 20 Years?

Assessing the consistency and frequency of Mastercard's stock repurchases over the past 20 years to determine reliability.

Over the last two decades, Mastercard has consistently repurchased its shares, as indicated by the data reflecting reliable repurchase years: ['2005', '2007', '2008', '2011', '2012', '2014', '2015', '2016', '2017', '2018', '2019', '2020', '2021', '2022', '2023']. The number of shares outstanding decreased almost every year from about 1 billion in 2003 to approximately 944 million in 2023. The average repurchase rate over these years was 39.0614 million shares annually. This trend suggests a proactive approach in returning value to shareholders by reducing the overall number of shares in circulation, which is typically seen as beneficial for stockholders because it can lead to higher earnings per share (EPS) due to the reduced share count. Therefore, Mastercard's stock repurchase strategy over the past 20 years can be considered very reliable and shareholder-friendly.