Five Things In MasterCard's Favor And One Against It

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Conservative investors don't want to get in a position where they have outlived their money.

So even dividend investors should have some quality growth stocks in their portfolio. Growth stocks usually don't offer big dividend yields, but they add more potential for capital appreciation.

MasterCard ( MA ) certainly qualifies as a growth stock . The big-cap stock has five things working in its favor and only one working against it. Let's go through the items:

• Dividend growth : MasterCard doubled the quarterly dividend payout this year and last year -- from 15 cents a share to 30 cents a share to 60 cents a share. Yet, the stock doesn't offer a juicy dividend yield. The annualized yield is 0.5%.

• Stability : The five-year earnings Stability Factor is 5 and the three-year factor is 2. The scale runs from 0 (calm) to 99 (wild). The Stability Factor measures the degree of variation around an earnings trend line.

• Growth : Earnings growth in the past three years was 24% in 2010, then 33% and last year 18%. While that's not quite elite status, it is much better than average. Europe, where MasterCard has exposure, has hurt earnings. If the problems in Europe recede, look for MasterCard to benefit.

• Institutional support : This stock attracts support across many investing approaches. Everybody from Warren Buffett'sBerkshire Hathaway (BRKA) (which has held its stake steady in the past five quarters) to Will Danoff's Fidelity Contrafund (which added to its position in the fourth quarter) has a stake in MasterCard.

• Strong fundamentals : Return on equity, a measure of financial efficiency, was 43% last year. Research shows elite stocks have an ROE of 17% or more. Pretax margin last year was a stunning 53.5% -- up for an eighth consecutive year.

The negative on MasterCard is found on the chart. The stock is the fourth week of a tight consolidation above the 10-week moving average. The pattern could turn into a second base on base. For now, the potential buy point appears to be 535.45.

The problem is the base count, which would be third stage. A third-stage pattern is more likely to fail than an early stage base.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Personal Finance , Investing Ideas

Referenced Stocks: MA

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