Payment processors (DIA) are rewarding their shareholders with dividend yields of 1%–2%, depending largely on operating performance. Below is a breakdown of major payment processors’ dividends in 3Q16:
- Visa (V) declared a quarterly dividend of $0.17 per share, which is higher than the $0.14 in the previous quarter. The company’s dividends paid translated into an annualized dividend yield of 0.8%.
- MasterCard (MA) announced a dividend of $0.19 per share, which is in line with 2Q16. The dividends paid resulted in an annualized dividend yield of 0.72%.
- American Express (AXP) declared a dividend of $0.32 per share in 3Q16, which is 10% higher than in 3Q15. The dividend translates to an annualized yield of 1.8%—higher than the industry average.
- Discover Financial Services (DFS) has a competitive dividend yield of 1.7%.
During 3Q16, Visa resumed its repurchases with 20.5 million units of its common stock at an average price of $80.76 per share, deploying $1.7 billion of its cash on hand. In fiscal 2016, the company bought back 92.1 million units of its common stock at an average price of $77.13 per share, deploying $7.1 billion of its cash on hand. It had another $5.7 billion authorized by its board for share repurchases under its current programs.
Payment processing giant MasterCard repurchased 6.0 million shares of its Class A common stock, which makes up 1.8% of the company’s total capitalization, at a valuation of $591.0 million. Through October 25, 2016, the company repurchased an additional 2.6 million shares for a total of $263.0 million, resulting in a remaining balance of $1.8 billion under the current buyback program authorization.
Next, let’s see which payment processors are generating the highest margins.