Western Union (NYSE:WU) – A Major Player In Global Payment Services With Over 4% Yield And Potential To Double

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Submitted by Dividend Yield as part of our contributors program .

Weekly Dividend Stock Ideas Researched by The Dividend Yield Weekly . Our weekly Dividend Idea is the global payment services stock Western Union ( WU ).

The money transfer company was sold-off by many investors after the disappointing the third-quarter results of the company. The company announced a 1% increase in sales and raised dividends by 25 percent and increased share buybacks to $750 million, but lowered the guidance in accordance to lower second-half revenues and a higher competition. The stock dropped around thirty percent and the current dividend yield after the dividend hike is over 4% at a P/E ratio of less than 7. Morningstar analysts estimated the fair value of the company at $25.0 which represents a potential to double.

We like the high integration and acceptation level of the company as well as the huge global diversification. Only 38% of the company's sales come from the United States, 28.31% from Europe and 27.18% from Asia. The business profile has a high degree of scale economics; Low investments are needed. Western Union generates $1.18 billion in net cash of which only $162 million were used for investments. The high free cash-flow of roughly $1.0 billion was mostly spend for dividends ($194 million) and share buybacks ($804 million). Here is a snapshot of the stock:

The Western Union Company (Western Union) is engaged in money movement and payment services. The Company's business payments service provides consumers and businesses with options for making one-time or recurring bill payments, including business-to-business payment transactions, which are primarily cross-border, cross currency transactions. Its segments are consumer-to-consumer and global business payments. Its other businesses not included in these segments primarily consist of Western Union money order and prepaid services available through a network of third-party agents.

Western Union ( WU ) has a market capitalization of $7.15 billion. The company employs 8,000 people, generates revenue of $5.49 billion and has a net income of $1.17 billion. The firm's earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $1.58 billion. The EBITDA margin is 28.73 percent (the operating margin is 25.22 percent and the net profit margin 21.22 percent).

Financial Analysis: The total debt represents 39.51 percent of the company's assets and the total debt in relation to the equity amounts to 400.45 percent. Due to the financial situation, a return on equity of 157.75 percent was realized. Twelve trailing months earnings per share reached a value of $2.01. Last fiscal year, the company paid $0.31 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 5.93, the P/S ratio is 1.31 and the P/B ratio is finally 8.27. The dividend yield amounts to 4.18 percent and the beta ratio has a value of 1.44.

These are the main competitors in detail:

Visa ( V ) has a market capitalization of $116.30 billion. The company generates revenue of $10.42 billion and has a net income of $2.14 billion. The firm's EBITDA amounts to $2.47 billion. The EBITDA margin is 23.72% (operating margin 20.53% and net profit margin 20.55%).

The company has no long-term debt. Last fiscal year, a return on equity of 7.93% was realized. Twelve trailing months earnings per share reached a value of $1.87. Last fiscal year, the company paid $0.99 in form of dividends to shareholders.

Here are the price ratios of the company: The P/E ratio is 76.85, Price/Sales 11.16 and Price/Book ratio 4.21. Dividend Yield: 0.92%. The beta ratio is 0.77.

American Express ( AXP ) has a market capitalization of $63.63 billion. The company generates revenue of $32.28 billion and has a net income of $4.90 billion. The firm's EBITDA amounts to $10.19 billion. The EBITDA margin is 31.58% (operating margin21.55% and net profit margin 15.18%).

The total debt represents 43.10% of the company's assets and the total debt in relation to the equity amounts to 351.63%. Last fiscal year, a return on equity of 27.64% was realized. Twelve trailing months earnings per share reached a value of $4.32. Last fiscal year, the company paid $0.72 in form of dividends to shareholders.

Here are the price ratios of the company: The P/E ratio is 13.13, Price/Sales 1.97 and Price/Book ratio 3.51. Dividend Yield: 1.41%. The beta ratio is 1.82.

eBay ( EBAY ) has a market capitalization of $63.00 billion. The company generates revenue of $11.65 billion and has a net income of $3.23 billion. The firm's EBITDA amounts to $3.39 billion. The EBITDA margin is 29.12% (operating margin 21.05% and net profit margin 27.72%).

The total debt represents 7.65% of the company's assets and the total debt in relation to the equity amounts to 11.65%. Last fiscal year, a return on equity of 19.44% was realized. Twelve trailing months earnings per share reached a value of $2.93. Last fiscal year, the company paid $0.00 in form of dividends to shareholders.

Here are the price ratios of the company: The P/E ratio is 16.61, Price/Sales 5.41 and Price/Book ratio 3.49. Dividend Yield: None%. The beta ratio is 1.47.

Mastercard ( MA ) has a market capitalization of $58.45 billion. The company generates revenue of $6.71 billion and has a net income of $1.90 billion. The firm's EBITDA amounts to $2.91 billion. The EBITDA margin is 43.30% (operating margin 40.41% and net profit margin 28.36%).

The company has no long-term debt. Last fiscal year, a return on equity of 34.43% was realized. Twelve trailing months earnings per share reached a value of $17.26. Last fiscal year, the company paid $0.60 in form of dividends to shareholders.

Here are the price ratios of the company: The P/E ratio is 27.20, Price/Sales 8.34 and Price/Book ratio 10.15. Dividend Yield: 0.26%. The beta ratio is 0.90.

Fiserv (FISV) has a market capitalization of $10.21 billion. The company generates revenue of $4.34 billion and has a net income of $473.00 million. The firm's EBITDA amounts to $1.25 billion. The EBITDA margin is 28.84% (operating margin 21.01% and net profit margin 10.91%).

The total debt represents 39.72% of the company's assets and the total debt in relation to the equity amounts to 104.20%. Last fiscal year, a return on equity of 15.14% was realized. Twelve trailing months earnings per share reached a value of $4.24. Last fiscal year, the company paid $0.00 in form of dividends to shareholders.

Here are the price ratios of the company: The P/E ratio is 17.73, Price/Sales 2.32 and Price/Book ratio 3.24. Dividend Yield: None%. The beta ratio is 1.03.

Global Payments (GPN) has a market capitalization of $3.41 billion. The company generates revenue of $2.20 billion and has a net income of $217.57 million. The firm's EBITDA amounts to $406.45 million. The EBITDA margin is 18.44% (operating margin 13.95% and net profit margin 9.87%).

The total debt represents 19.66% of the company's assets and the total debt in relation to the equity amounts to 45.08%. Last fiscal year, a return on equity of 15.97% was realized. Twelve trailing months earnings per share reached a value of $2.16. Last fiscal year, the company paid $0.08 in form of dividends to shareholders.

Here are the price ratios of the company: The P/E ratio is 20.01, Price/Sales 1.55 and Price/Book ratio 2.90. Dividend Yield: 0.18%. The beta ratio is 0.85.

The full Dividend Idea (Western Union) as PDF-report is linked.

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* I am long in WU shares. I receive no compensation to write about these specific stocks, sector or theme. I don't plan to increase or decrease positions or obligations within the next 72 hours.

For the other stocks: I have no positions in any other stocks mentioned, and no plans to initiate any positions within the next 72 hours. I receive no compensation to write about any specific stock, sector or theme.

The stock analysis, including the rating and up/down potential, is based on historical information and provided by several data provider like Thompson Reuters, Morningstar, GoogleFinance, YahooFinance and MSN. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Material presented here is for informational purposes only. Before buying or selling a security, you should do your own research and reach your own conclusion.



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: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: AXP , EBAY , MA , V , WU

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