MasterCard (NYSE:MA) brought good news for its shareholders and prospective investors by raising its quarterly dividend by 45 percent to 0.16 dollar per share. Not only that, the company has also given thumbs up to 3.75 billion share repurchase program. The real question is, is MasterCard (NYSE:MA) financially covered to make such choices? Has it bagged enough revenue to become so generous to its shareholders or is it just to tackle the rising threat of Apple Pay?
History tells us that MasterCard (NYSE:MA) hasn’t been concerned about the loyalty of its shareholders as much as the competition with the longtime rival Visa (NYSE:V). Visa (NYSE:V) upped its dividends by 20 percent last October and MasterCard (NYSE:MA) felt the need to go up one notch. We should also mention that MasterCard (NYSE:MA) holds enough finances to pay out more than just 0.16 per dollar. It seems as if the company was feeding token dividend to its shareholders rather than actually caring about their loyalty.
With the rising threat posed by Apple Pay, MasterCard (NYSE:MA) must be wary of the dwindling situation of credit and debit cards. Apple Pay has planted an idea that these cards are vulnerable to theft, be it physical theft or cyber theft. Apple Pay has impressed everyone and most of the sales made by iPhone 6 are because of Apple Pay. This scenario is threatening to not only MasterCard (NYSE:MA) but every financial corporation worldwide.
The dividends will cost MasterCard (NYSE:MA) 178 million dollars but as aforementioned, it is financially strong. MasterCard (NYSE:MA) has been making 7 to 8 billion dollars in every quarter which has put MasterCard (NYSE:MA) in a formidable position. So if we compare the dividend raise versus the actual revenue MasterCard (NYSE:MA) generates, it’s pretty low, in fact it’s meager. But that doesn’t mean MasterCard (NYSE:MA) is pulling a fast one on its investors.
It simply means that MasterCard (NYSE:MA) is playing safe. In these times of woe for such financial companies when Apple Pay is creating trouble for them, MasterCard (NYSE:MA) is simply making sure that in the future it has enough cash to keep the company going along with keeping the investors happy. China has also stated that it will keep the financial processors like MasterCard (NYSE:MA) and Visa (NYSE:V) on its domestic market.
So we can say that the company’s future is brighter than what most analysts would say. Having said that, MasterCard (NYSE:MA) must not get complacent because the threat posed by Apple Pay is large and quite genuine. In fact a couple of months ago investors were quite wary of investing in such companies because they thought that companies like MasterCard (NYSE:MA) and Visa (NYSE:V) were going out of business for good. But luckily that’s not the case and MasterCard (NYSE:MA) is strong as ever. But taking precautions won’t do any harm and would definitely be good for the future lest things get shaky.