Mastercard‘s (NYSE: MA) business is booming.
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The following charts tell the story.
The relentless growth of e-commerce
Few businesses are benefiting as much as Mastercard from the torrid growth of online sales. As one of the largest credit card networks, Mastercard is particularly well positioned to profit from the massive global shift toward digital payments and away from cash transactions.
Steadily rising revenue
Mastercard earns a small fee from every transaction that passes through its payment network, and its tollbooth-like business model produces a steadily rising stream of high-margin revenue.
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Surging profits
Mastercard is an incredibly profitable business. Over the trailing 12 months, the payments titan produced operating and net margins of 54% and 39%, respectively.
Strong cash generation
Mastercard’s asset-light business model requires minimal capital expenditures; it can add new merchants and cardholders to its network at little incremental cost. As such, Mastercard excels at turning its revenue into bountiful free cash flow.
Capital returns
Mastercard is committed to passing a sizable portion of its cash flow on to its investors through share repurchases and a growing dividend.
Although Mastercard currently yields only 0.6%, that’s mostly a reflection of its surging share price. The payments giant has boosted its cash dividend payout at a rapid rate over the past half-decade — a trend that should continue in the years ahead.
Looking forward
With powerful macroeconomic trends fueling Mastercard’s revenue, profit, cash flow, and dividend growth, investors can expect the payment titan to deliver solid even more gains in the coming years.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Mastercard. The Motley Fool has a disclosure policy.
