Article on Investing said that Mastercard as upped its quarterly cash dividend by 15.8%, now standing at $0.66 per share or $2.64 annually, equating to an annual yield of 0.6%.* The dividend is scheduled to be disbursed on February 9, 2024, to shareholders on record as of January 9, 2024, with the ex-dividend date set for January 8, 2024. Additionally, the Board of Directors has sanctioned a fresh share repurchase initiative, enabling the company to buy back up to $11 billion of its Class A common stock. This forthcoming program will take effect upon the culmination of the ongoing $9 billion share repurchase plan announced in December 2022, leaving approximately $3.5 billion available for repurchase as of December 1, 2023.
I believe, this are the most positive news an investor can receive. On one hand, buybacks usually (at least from my experience) cause a stock to grow, and on top of that, any investor holding their stock will get for about 15,8% higher dividends yield.[1] I think it is also important to mention, that Mastercard is not the only company performing buybacks.
Note to myself, why companies are deciding for buybacks: Companies often raise funds by issuing common and preferred shares, so it might appear counterintuitive when they opt to buy back these shares. However, there are compelling reasons behind such actions. Share repurchases, also known as normal-course issuer bids (NCIBs) in Canada, offer numerous advantages. They include reducing the cost of capital, consolidating ownership, maintaining stock prices, capitalizing on undervaluation, and enhancing crucial financial ratios.
Checking the chart, I was amazed by the growth. Only in the last five years, stocks have managed to produce a growth of 100%, while since coming to the market they have grown for more than 9000%. * It seems like a strong company, that’s why I decided to enter the trade and buy some of them.
Movement of Mastercard stocks in the last five years. (Source: Investing) *
* Past performance is no guarantee of future results.
[1] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or based on the current economic environment which is subject to change. Such statements are not guaranteeing of future performance. They involve risks and other uncertainties which are difficult to predict. Results could differ materially from those expressed or implied in any forward-looking statements.