Part of the reason why Visa hasn't made a bigger effort to increase its dividend is that it has found other uses for its spare cash. The company is spending $23 billion in order to buy out former subsidiary Visa Europe, eliminating a key source of international competition and allowing Visa to boost its pricing while gaining some cost savings from merger-related synergies. The move consolidates Visa's stranglehold over the card market and is a major threat to the international strategies of MasterCard and American Express, both of which have benefited in the past from the divided front that Visa and Visa Europe provided.
In addition, Visa has moved aggressively toward promoting stock repurchase programs. In late 2014, the company said it would begin a new $5 billion buyback, and as of September, it had spent $2.9 billion to repurchase 44.1 million shares. The company re-upped its commitment with a fresh $5 billion for further repurchases this fall.
Nevertheless, it's hard to argue that Visa couldn't make room for more generous payouts to its shareholders. In its most recent quarter, Visa posted adjusted earnings of $0.62 per share. Even with an increased dividend, that works out to nearly five times what Visa pays its shareholders in dividends. Visa has ample room to increase its payout without having a major impact on other needs for its cash.
When will Visa's dividends rise again?
Visa's recent dividend increase was par for the course for the card provider, which tends to make its annual dividend-hike announcements at roughly the same time each year in late October or early November at the conclusion of its fiscal year. Given its preference for stock buybacks and internal investment, investors shouldn't expect dramatic action on the dividend front, but they can probably count on Visa to deliver a typical boost late in 2016 that won't lift its yield by enough to make most dividend investors take notice.
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The article Will Visa Inc. Raise Its Dividend in 2016? originally appeared on Fool.com.
Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends MasterCard and Visa. The Motley Fool recommends American Express. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .
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