One of the biggest companies in the U.S., Visa (NYSE:V), is a Dow Jones component and a relatively safe holding when times get tough. Indeed, they’ve been tough during the spread of the novel coronavirus. Yet V stock continues to pay dividends and provide value to shareholders through price appreciation.
But you shouldn’t just lump V stock in the category of boring safety stocks. Visa remains a dynamic company that’s highly responsive to shifting consumer demands. That’s not so say that Visa chases every little trend, but only that the company has been able to stay ahead of the curve.
Advances in technology, along with events precipitated by the coronavirus, have drastically changed the landscape for payments processors like Visa. The ability to change with the times is, among other factors, what will keep the company relevant and top-of-mind for generations of cautious investors.
V Stock At a Glance
Just because some folks consider V to be a safety stock, doesn’t mean that it’s completely immune to drawdowns. People ostensibly weren’t in the mood to spend much in February and March. This was reflected in the V share price action during those two months.
A strong stock price recovery is in progress, however, which makes sense as the fear and panic gave way to a reopening of the economy. The forward momentum of V stock suggests that the 52-week high mark of $214.17 could easily be breached before the year is finished.
Additionally, income-focused investors can hold the shares and collect dividend payments while they wait. Granted, the forward annual dividend yield of 0.60% isn’t exactly going to make you wealthy overnight. Still, at least Visa didn’t suspend or eliminate its dividend like some companies did amid the coronavirus crisis.
People Are Spending Again, but Differently
PSCU, a payments credit union service organization, recently collected data on consumer shopping and spending trends. Encouragingly, the data indicated an improvement as shutdown rules are being relaxed in phases.
This is absolutely bullish for Visa as the company’s business depends on people’s willingness to spend. Interestingly, people aren’t spending on the same item categories that they did prior to the pandemic.
PSCU’s data concentrated primarily on the week ending on May 17. The findings suggested a de-emphasis on spending in the areas of entertainment, fuel, travel, education, business supplies, government healthcare, department stores, restaurants, and QSR (which stands for quick-service restaurants, or fast food).
What did people spend their money on, then? The evident trend was towards life’s necessities. These categories include food, telecom and utilities, automotive retail goods, and drugstores.
Major Shifts in Progress
Some of the foregoing results might not be too shocking. Yet, there’s another conclusion that may surprise you. PSCU found that people are spending less using credit cards and more with debit cards.
For the week that ended on May 17, the overall credit card spend declined by 16% year-over-year. At the same time, the overall debit card spend increased year-over-year by 9.2%.
Not only that, but the average debit card purchase amount rose 17% year-over-year. That might not even be the biggest spending shift of all. Analysis conducted by ACI Worldwide revealed 209% year-over-year growth in e-commerce sales in the general retail sector.
Even with these major changes in progress, Visa won’t need to re-brand itself as an e-commerce payments specialist. The company is already widely recognized and accepted by shoppers. And in the words of Diamond Hill Capital, Visa’s business is “relatively resilient, with a mix of credit and debit offerings across discretionary and non-discretionary categories.”
The Final Word on V Stock
Investors in V stock shouldn’t worry that people are going to stop spending money. They’ll just spend their money differently. Visa is perfectly capable of making the necessary adjustments and reminding the investing community, once again, of why it’s such a big and well-regarded company.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.