I recently made a purchase of 25 shares of Western Union (NYSE:WU) at $16.40. This is a new purchase. The stock has traded down since the CEO announced additional expected compliance cost from next year and the market has overreacted. pushing the stock to a PE ratio of 10.86. The 5-year low and high PE ratios are 8 and 15. Due to the price move, yield is now higher than 3% which satisfies my requirement.
The 5 year dividend growth has been 60% while the payout ratio is still quite low at 32.5%. 5 year sales growth was around 3% while EPS grew by 8.77% annually. Western Union still continues to be a market leader outperforming the peers by multiples and I like this a lot. There are a couple of negatives for the stock. Firstly, the leverage (Debt/Equity) of 377% is making me quite uncomfortable. Further, recently the CEO resigned in October implying some definite challenges going forward. That said I still find the ROA of 8.9% quite healthy while there is an easy room for dividends to grow even with added compliance costs over the coming years when the management stabilizes. I have taken only a small position in the stock and might add another equal position of $400 if the stock price comes down considerably with the market. It is a high beta stock (beta = 1.37), so that remains a risk. However, I don't want to miss out on this opportunity to invest in this market leader at a reasonable enough price.
Disclosure: I am long WU.