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Why Visa’s Dividend Yield Has Fallen in 2017

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How Visa’s net operating revenue performed in 2016 and 2017

Visa’s (V) net operating revenue rose 9% in 2016 and 22% in 2017. The US and international segments drove operating revenue growth during those periods. Service revenues, data processing revenues, and international transaction revenues drove growth in both years.

How diluted EPS performed in 2016 and 2017

Operating expenses increased 49% in 2016 before decreasing 14% in 2017. The rise in 2016 was due to losing out on a Visa Europe Framework Agreement. As a result, operating income fell 13% in 2016 before rising 54% in 2017. Interest expenses have increased over the years. All this has translated to a 5% fall in net income for 2016 before a 12% growth in 2017. Diluted EPS (earnings per share) fell 4% in 2016 before rising 13% in 2017. Share buybacks have further enhanced EPS. The company has maintained an impressive free cash flow position.

Dividend yield and price performance

Visa’s dividend yield curve has been on a downward slope in 2017 after an upward slope in 2016. That’is due to 44 times price gains, which offset the effect of an almost uniform dividend growth in 2017 compared to 2016. Prices have risen 44.3% on a YTD (year-to-date) basis. Visa’s PE (price-to-earnings) ratio of 40.3x compares to a sector average PE ratio of 64.1x. Its dividend yield of 0.6% compares to a sector average dividend yield of 904.8%.

How does Visa compare to the broad indexes?

The S&P 500 (SPX-INDEX) (SPY) offers a dividend yield of 2.3%, a PE ratio of 23.3x, and a YTD return of 18.4%. The Dow Jones Industrial Average (DJIA-INDEX) (DIA) has a dividend yield of 2.2%, a PE ratio of 21.9x, and a YTD return of 23.1%. The NASDAQ Composite (COMP-INDEX) (ONEQ) has a PE ratio of 25.0x and a YTD return of 27.1%.

The Reality Shares DIVCON Leaders Dividend ETF (LEAD) has exposure to Visa. It has a PE ratio of 20.2x and a dividend yield of 0.9%. The iShares Core Dividend Growth (DGRO) has an 18% exposure to technology. It has a PE ratio of 20.6x and a dividend yield of 1.9%.

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