If you are a Mastercard (NYSE:MA) shareholder in 2020, you have to be happy with the performance of MA stock thus far. To this point, Mastercard stock has nearly rose by 10%.
Furthermore, if you were a MA stock shareholder in 2019, the fact that it gained 58% on the year has to put a smile on your face.
However, if you were a shareholder of Mastercard for the entire decade of the 2010s, you’ve got to be ecstatic. MA stock was one of the 20 best-performing S&P 500 stocks over the past decade with a total return of 1,078% — good enough for 17th position on the list.
With all of that in mind, we are now into the second month of the next decade. And Mastercard is showing no signs of slowing down. It’s why in December, I named it one of seven S&P 500 stocks from the past decade’s list of top performers that I thought would deliver a repeat performance in the 2020s.
As financial technology continues to make great strides, I believe Mastercard will be at the forefront of this innovation. That said, I believe it’s destined to be an S&P 500 star in 2020 and beyond.
Share Repurchases and Dividends
While Visa (NYSE:V) seems to be the payments company that gets more of the spotlight, Mastercard managed to outperform Visa over the past 10 years. MA stock delivering an annualized total return of 31.22%, more than 520 basis points higher than its large-cap competitor.
Mastercard is so confident about its future that it increased its quarterly dividend by 21% in December to 40 cents per share. In part to offset this increase, it will continue to buy back its shares.
The company completed the $300 million in share repurchases remaining on its previous $6.5 billion share repurchase authorization in the fourth quarter. It finished the fourth quarter buying back 3.6 million shares for $277.78 per share. With that, it now has $7.9 billion left on its new $8 billion share repurchase program.
Currently trading around $330.50, Mastercard has already received about 19% return on its $1 billion investment buying back its stock. Furthermore, the company won’t have to pay close to $6 million in dividends in the next year as a result of its buybacks.
As I stated in December, the buybacks are a sign it’s very confident about its future cash flow from its operations. So, this alone should have investors excited about MA stock.
Earnings Were Fine
Mastercard reported its fourth quarter 2019 results on Jan.29, and it beat Wall Street’s estimates for both revenues and profits. On the top line, it had $4.41 billion in sales, $10 million higher than the consensus. On the bottom line, it had adjusted earnings of $1.96 a share, nine cents higher than expectations.
Year-over-year, Mastercard’s sales rose 16%, gross dollar volumes processed rose 12% and adjusted earnings increased by 23%. Additionally, its operating margin increased 22 percentage points to 54.4% from 32.4%. However, on a non-GAAP adjusted basis, the actual increase was 210 basis points from 52.3% in Q4 2018.
In Q4 2019, Mastercard increased its revenues by 16%, excluding currency to $16.9 billion. On the bottom-line, its adjusted earnings per share was $7.77 a share, 23% higher, excluding currency, over 2018.
As chief executive officer Ajay Banga said in Mastercard’s conference call, the company is seeing healthy consumer spending across many of its regions and it expects this to continue in 2020. Despite some weak spots in South America and Asia, the global economy is doing alright and that’s helping Mastercard’s performance.
Interestingly, Banga mentioned that Mastercard sees open banking as an important global trend that should help the company’s cross-border payments business.
The Bottom Line on MA Stock
Mastercard’s chief financial officer Sachin Mehra finished his segment of the conference call by stating that it has developed a strong group of products that will help the company grow in the short, medium and long term.
If there’s a stock to buy and throw in a drawer, Mastercard is it. That said, expect more good things from MA stock in 2020 and beyond.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
