) announced that its Board of Directors has authorized the
repurchase of its Class A common stock worth approximately $1.5
billion. The new share repurchase program will be effective after
the company is done with its earlier $2 billion share repurchase
authorization that was approved by the Board on September 14, 2010
and April 12, 2011 respectively.
Until the end of April, MasterCard bought almost 304,600 shares
for approximately $106 million since the fourth quarter of 2011. As
of May 31, the company had $270 million remaining under its
previous share repurchase authorization.
The initiative taken by the company to proactively return value
to its investors accrues from its ability to generate strong cash
flow. As on March 31, 2012, MasterCard's net operating cash flow
grew 20.2% year over year to $427 million, its cash and cash
equivalents stands at $3.68 billion with no long term debt
obligation. MasterCard's trailing 12-month return on investment
(ROI) of 31.78% stands significantly ahead of the sector average of
The shares of the company currently trade at $419.98 (as on June
6, 2012) exhibiting an increase of 11.78% from the previous day's
closing price. The spurt in the company's share prices can be
attributed to the recent announcements made by the company as well
as favorable market conditions.
The latest announcement of paying a cash dividend of 30 cents
per share to holders of record of its Class A common stock and
Class B common stock on August 9 further boosts investors'
confidence on the stock.
However, it is to be noted that other peers in the industry are
almost equally proactive in this respect. During the first quarter
2012, MasterCard's close competitor
American Express Co.
), also known as AmEx, announced that its Board of Directors
sanctioned the repurchase of almost 150 million shares from time to
This came as a replacement for the company's prior 200 million
share buyback program that had about 38 million shares remaining
for repurchase. AmEx also projects to buyback shares worth $4
billion in 2012 followed by another $1 billion in 2013.
MasterCard retains a quantitative Zacks #3 Rank, which
translates into a short-term Hold rating. Also, we maintain a long
term Neutral recommendation on the stock.
AMER EXPRESS CO (AXP): Free Stock Analysis
MASTERCARD INC (MA): Free Stock Analysis Report
To read this article on Zacks.com click here.