At times, dividend stocks are dismissed as being boring. Growth investors might not take dividend stocks seriously, as dividends are typically reserved for slow-growth, lumbering giants. But there are dividend stocks out there that provide all the growth an investor could ask for.
For example, shares of Visa Inc. (NYSE: V) are up 600% in the past decade. This makes Visa the best-performing dividend stock of the last 10 years. Such an astonishing rate of return makes Visa a rare stock, and there are no signs that the company’s amazing growth is about to slow down.
Visa has the top brand in a high-growth industry. It is also a shareholder-friendly company. The Visa dividend is raised each year and the company and share buybacks each year. Visa is a unique combination of growth and dividends, all in one.
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Firing On All Cylinders
The world is steadily moving away from cash. Consumers, particularly younger generations like millennials, are becoming more comfortable conducting financial transactions digitally.
It is easy to see why physical currency is going out of favor; it can be lost or destroyed. Consumers like the convenience of credit and debit cards are far more convenient. Technological advancements have enabled financial transactions on smartphones.
Payment processing giant Visa has capitalized on the shifting trends. The company delivered an impressive earnings beat last quarter. Revenue increased 14%, as total processed transactions rose 13% for the quarter. Adjusted earnings per share increased 15%.
Last quarter, Visa’s U.S. payments volumes increased 9%, while credit transactions grew 10% and debt transactions grew 8%.
Fiscal 2017 was a great year for Visa. Net revenue and earnings per share both increased 22% for the year. Visa continues to benefit from growth in the U.S., and international growth thanks to the $23 billion acquisition of Visa Europe in 2016. Visa Europe added five percentage points of accretion to the company’s overall earnings last quarter.
There is plenty of room for Visa’s high growth to continue for the foreseeable future.
Multiple Growth Catalysts Ahead
The global payments industry continues to grow, and Visa is growing rapidly in new markets. For example, last quarter the company introduced its mobile platform mVisa in Kenya and Nigeria.
The company is preparing for the next wave of technological advancement here in the U.S. It has partnered with Fitbit (NASDAQ: FITB) and Garmin (NASDAQ: GRMN) to enable digital payments through their wearable devices.
Mobile connectivity is an emerging growth category for the payments industry. To that end, Visa is rolling out new services like Visa Checkout, Visa Direct and Visa Token Services.
Because of the company’s high growth, it can shower cash on its investors. The company returned over $7 billion to investors through share buybacks and dividends last year, and expects to return $9 billion in the upcoming year.
The Visa dividend yield just below 1%. It is by no means a high-yield stock. But Visa more than makes up for this with very high dividend growth rate. The company recently hiked its dividend by 18%. At that rate, Visa’s dividend would double every four years.
Double-Digit Earnings Growth
Visa does what few companies can do. It consistently increases earnings at a double-digit rate, and raises its dividend by over 20% per year. This is no easy task, and is takes a strong company at the top of its industry to pull it off. Visa is an example all these qualities in one stock, which is why it is the No. 1 dividend stock of the past 10 years.
Visa’s tremendous stock rally in the past decade has elevated its valuation. At over 40 times earnings, it is hard to argue that Visa is a cheap stock. But high-growth companies dominating their industries typically warrant premium valuations. Visa is generating enough growth to continue propelling the stock going forward.
As the global payments industry grows, Visa and the Visa dividend will continue to grow as well. Investors can continue to expect double-digit earnings growth, and 20% dividend increases, over the long-term.