Is Visa Going To Give Investors A Giant Dividend Boost?

| About: Visa Inc. (V)

I'm taking Visa (NYSE:V) as good for its word. That means another giant dividend boost is coming when the company reports October 31. Last year, Visa gave its loyal shareholders a 47% raise. This year, the company is likely to be uber generous once again. Right now, Visa pays 22 cents a quarter. That number should soon be replaced by 30 to 32 cents.

Why? After all, Visa already has a high 60% dividend payout, much higher than Master Card's (NYSE:MA) 4% or American Express' (NYSE:AXP) 13% payouts.

The Logic Behind The Bump

Visa is minting money. Check out its free cash flow. It blows away earnings by a wide mile. $4 billion in FCF versus $1 billion in net: Not many companies have such a wide differential.

V Free Cash Flow TTM Chart

And really, free cash is the metric Visa wants us to think about when it comes to dividends.

Per its CEO:

As has been the case for close to 4 years now with this free cash flow, we will continue to fund growth in our core business, launch and support new products and pursue selective acquisitions in order to further maximize shareholder value. What is left over will be returned to our shareholders in the form of repurchases and dividends.

Visa has spent $1.5 billion over the last year on buybacks and dividends, leaving $2.5 billion or $3 a share available - the "leftovers," more than enough for a giant raise. Visa loves buybacks even more. Visa favors share repurchases over dividends: Expect that to continue.

And who knows? With taxes on dividends set to go up come January 1, Visa just might "sneak" in a $1 special dividend before the end of the year. Now that's just a wild piece of speculation on my part, but how better to reward shareholders?

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. We do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for his specific situation.

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