Basking after a great quarter and year, yesterday, the board of
) declared a 100% hike in its dividend to 30 cents per share from
the prior 15 cents. The increased dividend will be paid on May 9,
2012 to shareholders of its Class A common stock and Class B common
stock as of April 9, 2012.
On February 9, 2012, the company paid a quarterly cash dividend
of 15 cents per share to the respective shareholders of record as
on January 9, 2012. This was announced on December 6, 2011.
With no long-term debt, cash and cash equivalents of over $3.7
billion and operating cash flow of $2.7 billion at the end of 2011,
the company delivers solid free cash flow and is well poised to
return wealth to investors through consistent dividend payouts and
share repurchases, which will also help it retain market
Such an improved operating and financial leverage had previously
helped MasterCard to extend its share repurchase authorization to
$2.0 billion in April 2011 from $1.0 billion approved in September
2010. Going ahead, we remain confident about the company's ability
to remain cost effective and continue to return added value to its
Last week, MasterCard reported fourth-quarter 2011 operating
earnings per share of $4.03, which came in drastically ahead of the
Zacks Consensus Estimate of $3.90 and $3.16 in the year-ago
quarter. Net income for the reported quarter stood at $515 million,
spiking 23.7% from $415 million in the prior-year quarter.
Results for the reported quarter improved over the prior-year
quarter primarily due to better pricing, an increased number of
processed transactions and strong gross dollar value (
) growth. However, a higher tax rate and operating expenses along
with the merchant litigation expense were the downsides.
For full-year 2011, MasterCard recorded operating net income of
$2.4 billion or $18.70 per share as compared with $1.85 billion or
$14.05 per share in 2010. Operating earnings per share also
exceeded the Zacks Consensus Estimate of $18.57 per share.
Consequently, MasterCard is expected to generate earnings of
$5.25 per share, as per the Zacks Consensus Estimate, escalating
about 22% from the year-ago quarter. In the last 7 days, since the
fourth quarter earnings release, 14 of the 25 analyst firms have
revised their estimates upward, while 6 downward revisions were
witnessed. For 2012, earnings are likely to increase by about 17%
over 2011 to $21.82 per share.
MasterCard benefits from strong secular demand growth,
meaningful international exposure, diversified product portfolio,
high barriers, excellent pricing power, risk-free balance sheet and
impressive operating leverage. Also, the above-average earnings
growth, strong competitive position and leverage to an eventual
economic recovery will result in a relative valuation premium.
However, we are concerned about MasterCard's resilience and
ability to raise prices, increased operating expenses, the
detrimental effects of the Consumer Protection Act in the U.S. and
scope for increasing cash flow. Hence, the cautious outlook over
the near term justifies our Neutral recommendation in the long run.
This is also reflected in the Zacks Rank #3, which implies a
short-term Hold rating.
Besides, MasterCard's prime peer,
) is slated to report is fiscal first quarter 2012 (ended December
31, 2011) financial results after the market closes on February 8,
MASTERCARD INC (
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