Basking on three solid quarters of 2013, the board of
electronic card processing giant -
) announced fresh plans to boost capital efficiencies, while also
returning excess wealth to shareholders.
Per capital plans, MasterCard announced its first 10-for-1
common stock split effective Jan 21, 2014 to shareholders of
record as on Jan 9, 2014. The stock split will make the shares of
the company affordable enough to reach out to smaller investors,
thereby shoring up demand in future.
Accordingly, MasterCard will issue 9 more shares against each
share held by an investor. Overall, the company will issue about
1.1 billion additional shares, thereby increasing the total
shares outstanding to 1.2 billion from 120 million.
However, the current market capitalization (calculated as the
product of share price and total shares outstanding) of about
$91.92 billion will remain intact. Conversely, the share price of
MasterCard will depreciate, in turn making it inexpensive for
small investors. At the current price, the stock split will
likely bring down the market price to approximately under $80 per
Capital Deployment Actions
Adding to shareholder value, the board of MasterCard also
sanctioned a new share repurchase program worth $3.5 billion,
which will be implemented once the remaining $514 million of
stock is bought back from the prior authorization of $2.0
billion, approved in Feb 2013.
Further inflating shareholder return, MasterCard hiked its
quarterly dividend by 83% to $1.10 per share from the prior
pay-out of 60 cents. Post the stock split, this will equate
to 11 cents per share or an annual dividend of 44 cents. The
raised dividend will be paid on Feb 10, 2014 to shareholders of
record as on Jan 9, 2014.
This marks the second hike in 2013. Previously, MasterCard had
increased its dividend annually by 100% each in Feb of 2013 and
2012, reflecting an unswervingly strong financial position. At
the current price, the raised dividend of $1.10 a share generates
a dividend yield of 1.4%, up from the prior 0.32%.
While the stock split is expected to increase the number of
shares and attract a diverse group of investors, the consistent
and incremental share repurchase program will help lower the
share count, thereby pumping up earnings per share in the
upcoming quarters. The dividend hike further boosts shareholder
confidence in the stock.
Subsequently, shares rose 0.6% to $763.61 at the end of Dec
10, whereas an appreciation of 4.77% was witnessed in the
after-hours trading. A 60% hike in market price was recorded so
far in this year itself. MasterCard's stock has escalated over 20
times in less than 8 years of going public, since its initial
public offering (IPO) at $39 in May 2006.
MasterCard presently sports a Zacks Rank #2 (Buy). Some other
card payment service providers like
Higher One Holdings Inc.
Global Payments Inc.
), also carrying the same Zacks Rank as MasterCard, are worth
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