Visa: Dividend Monster Over Next Decade

| About: Visa Inc. (V)

Summary

Visa is a buy and hold strategy to consider for the long run.

Pricey, yet worth every penny.

A dividend monster in the next decade.

I wanted to cover one of my favorite stocks for the last few years, Visa (NYSE:V). If you were one of the many lucky investors who purchased this stock three years ago, you have been rewarded greatly. In that short time you have almost doubled your money, not bad for a buy and hold investment! I will touch on four specific parts as to why it may be a good idea to purchase for the long run.

Earnings:

From 9/2014 to 9/2015 earnings per share grew by %16. The following year another %5, despite major acquisitions and dividend growth. 2017 projected earnings should grow another %16. Over the past 5 years historically its EPS growth has been %30.65, quite a nice number. Once Visa Europe gains its footing it should provide a nice revenue increase for the next decade.

Dividend Growth:

While only yielding a low %.72, the dividend has been growing steadily over the years. Over the past 5 years the dividend has grown by %30.88. These are some very strong numbers and while you may have to wait some years for it to reach a higher yield, you should be compensated for your time with wonderful capital appreciation.

Valuation:

Currently at a stock price of $77.55 a share, Visa is slightly over valued. I would wait for a slight pull back in stock price to get long on the investment. Its P/E ratio currently is a sky high 30.17x however that is not a cause for alarm. Its trailing twelve months P/E is not far behind at a lofty 29.94x so no worries there. If earnings can grow at the rate they are expected to, a price target by 9/2017 would be around the $95 a share mark. I arrived at that number by adding the EPS guidance for the following year times its current TTM.

Revenue and Company Growth:

Visa is getting putting the finishing touches on its Visa Europe deal. This opens up Visa to an entirely new market ripe for revenue growth. Over the past 5 years revenue growth has been a decent %10.88, once again not a bad number. The past twelve months have shown a slightly slower growth of %8.39. While it has slowed down I do not think this should be of an concern to long term investors.

Conclusion:

I believe buy and hold investors would do great with this stock for the next decade and beyond. As a young (27 year old) investor, I have held the stock for the past three years and had been rewarded greatly. I have no doubt that will continue in years to come. Investors should not be shy about the low dividend yield the stock currently has. The dividend will continue to grow with the company as its revenue and earnings per share increase. The extra cash flow quarterly from Visa Europe will speed up the process as well. With a price target of $95 by the fall of 2017, this looks like it could be a winner on all levels. Investors should keep a close eye on share price the next couple months, I myself will add to my existing position at a price target of $74 a share.

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Happy investing and good luck!

Disclosure: I am/we are long V, SHORT SPY THROUGH BEAR CALL SPREADS.

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.

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