Visa's $98 Billion Payout Dilemma
Visa's (V) generous payouts to its shareholders have been substantial, totaling $98 billion over the last five years. This staggering sum represents approximately 14.3% of the company's current market value.
The payments giant has consistently generated a significant amount of free cash flow, reaching $21.01 billion in the past twelve months with an operating margin of 66%. The majority of this cash went towards stock buybacks ($78 billion) rather than dividends ($20 billion).
Despite its impressive financial performance, Visa's stock has underperformed the S&P 500 by more than twenty percentage points over the same period. This paradox raises questions about whether the company's cheaper multiple is justified.
The key to Visa's success lies in its newer ventures, such as Commercial and money movement solutions and Value Added Services, which include data analytics, security, and consulting. Revenue from these areas has grown significantly, with 17% and 34% increases respectively in the last quarter.