Scott Sweet - Austin, TX

Visa Stock Ownership Has Its Privileges

Sorry for double comment...registration issues

Visa Stock Ownership Has Its Privileges

I only have one concern, as I can't help compare Visa to the MasterCard history and present day.

The dividend is a pittance (in my humble view) and the stock seems to be trading too high based on the P/E. If you apply the valuation of stock price formula of Price = Dividend / (Prevailing Interest Rate - Growth of stock interest rate) and plug in the Price and Dividend announced, you end up with the difference between Prevailing Interest Rate and Growth of 0.13 %. (0.105 / 81.40). This implies to me that the growth of Visa is expected to be no greater than buying a bond in a time when the interest rates are climbing, but still low.

My comparison to MasterCard being that the reversal of this analysis would have MasterCard trading at 465. This is a price that would be fantastic as I’m also long in MasterCard, but 465 is a price that is very unrealistic with the current financial statements. Just for further comparison, AXP results in 1.65%.

I'm no expert and maybe shouldn't post here, but I'm invested in Visa as a long and hoping for the best. Can anyone with more insight that I can muster help me sleep better at night as I continually ride the Visa ship in the turbulent market? Is the IPO price closer to reality or can we expect the steady climb to 100 and above to continue as the market and oil prices allow? I see the future growth in markets opening up to Visa....but I don't see it in the current price or dividend.

On a side note, how can anyone miss the fact that banks assume the liability and not Visa (or MC or AXP)? Thank you jsh921 and frankmeister for “getting it”. Go Visa!