Visa (V -0.70%), the largest payments company in the world with a market capitalization of $564 billion, has paid a quarterly dividend since going public in 2008. Moreover, Visa management has a history of raising its dividend each year, with another increase announcement expected soon.
Visa's total return has trailed the S&P 500 index over the past five years, but research from Hartford Funds shows that companies with consistent dividend growth and low payout ratios tend to outperform the market in the long run. Let's explore these key metrics to assess Visa's potential.
Here's how Visa returns capital to shareholders
Over the past 12 months, Visa paid a quarterly dividend of $0.52 per share, equating to an annual dividend of $2.08 per share and a yield of 0.74%.
Given its history of announcing a dividend increase with its fiscal fourth-quarter earnings release, Visa investors can reasonably expect management to announce another hike when the company reports its fiscal Q4 2024 earnings on Oct. 29. Over the past decade, Visa has averaged an annual dividend growth rate of nearly 18%, offering insight into the potential size of its next increase. To add to the probability of future increases, Visa's payout ratio -- the percentage of earnings a company pays out as dividends -- is a paltry 21.5%, meaning it doesn't burden other capital allocation strategies.
In addition to paying dividends, Visa regularly repurchases its stock, a more tax-efficient way of returning capital to shareholders. Reducing the number of shares available gives each remaining share a larger ownership stake. Over the past year, Visa has been particularly active in this strategy, reducing its outstanding shares by 5.2% through aggressive buybacks. At the end of its fiscal Q3 2024, the company had $18.9 billion remaining on its share repurchase program.
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