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Will MasterCard’s Distributions Outperform Visa’s?

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Legacy to continue

MasterCard (MA) has been paying dividends on its outstanding common stock for the past few quarters and is expected to continue this legacy, subject to funds availability. In 1Q17, the company’s cash used in financing activities fell $358 million as compared to 1Q16 mainly due to lower repurchases of common stock (Class A), partially offset by higher dividends.

In 1Q17, quarterly dividend payments totaled $238 million, an increase of 12.3% as compared to 1Q16’s dividend payment of $212 million. On February 7, 2017, the company announced a cash dividend of $0.22 per share on a quarterly basis, which would be payable on May 9, 2017.

In December 2016, management authorized a share repurchase program of up to $4 billion, which will only become effective after the completion of the previously declared share repurchase program announced in December 2015.

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Peer dividend yields

MasterCard (MA) is facing tough competition from Visa (V) in terms of distributions. However, as of March 31, 2017, MasterCard’s quarterly dividend payments totaled $238 million. Visa returned capital to its shareholders in the form of dividends, which amounted to $400 million. Another thing to look at is Visa’s $5 billion share repurchase program. MasterCard’s dividend yield stands at 0.71%. Other players have reported the following dividend yields:

  • Visa (V): 0.69%
  • American Express (AXP): 1.6%
  • Discover Financial Services (DFS): 2.0%
  • Fidelity National Information Services (FIS): 1.3%

These four companies jointly form 1.4% of the iShares Core S&P 500 ETF (IVV).

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