Visa company V recently announced a massive share buyback program. In its latest 8-K SEC filing, the financial deals giant said its board of directors has approved a new $12 billion share buyback program. This strategic move is likely to enhance shareholder value.
In the last quarter of fiscal year 2021, the company repurchased $3.1 billion worth of stock. As a result, the previous stock buyback program had $4.7 billion remaining at the end of the quarter. Of this amount, V has exhausted $3.5 billion through December 15, 2021. The balance of $1.2 billion will be added with the new authorization, bringing the total funds available for repurchase to $13.2 billion. The share repurchase permission comes without an expiration date.
Buying back shares and increasing your dividend is a wise way to maximize shareholder wealth and generate more value. Visa has increased its dividend every year since 2009, most recently with a 17% increase in October. V’s latest stock buyback program indicates its commitment to providing long-term value to shareholders and reflects the company’s confidence in its financial position and ability to generate sufficient cash flow.
Speaking of its strong financial position, Visa exited the fourth quarter of fiscal 2021 with cash and cash equivalents of $16.5 billion. Total debt to capitalization is 35.8%, which is below the industry average of 37.7%. It has abundant liquidity, with access to the commercial paper market on favorable terms. Also, it has a strong free cash flow mode. In the subsequent twelve-month period, Visa’s free cash flow after dividend increased 63.4% to $12,032 million.
However, capital deployment activities are not the only factor to consider while judging the company. Investors interested in this stock can take a look at its growth opportunities. The company is exploiting the crypto ecosystem to take advantage of the growing crypto market.
Visa recently strengthened its partnership with Company Nuvei NVEI, with the latter announcing the rollout of branded crypto-friendly Visa debit cards in the UK and European Economic Area. This move enables Visa to reduce the gap between cryptocurrency and traditional finance. Visa is expected to provide a simple and secure cryptocurrency spending path. This will improve the crypto and digital asset payments ecosystem and reduce risks, time to market and costs.
Visa’s increasing proficiency in the cryptocurrency ecosystem and its partnership with Nuvei in the huge European market are likely to contribute to the growth of the top line. Visa appears to be well positioned to take advantage of the prevailing scenario as the global leader in digital payments works closely with more than 60 crypto platforms. Just like Visa, there are other companies like MasterCard Incorporated Master and PayPal Holdings, Inc. PYPL has also made its moves to capitalize on the growing popularity of cryptocurrencies.
In July 2021, Mastercard teamed up with a series of crypto companies in an effort to unveil a card offering and offer seamless cryptocurrency conversion. MA is partnering with cryptocurrency platforms to take advantage of the growing number of consumers entering the crypto space. The company is making several endeavors to offer digital currency wallets and a seamless exchange experience, which leads to more consumers turning towards crypto cards to buy digital assets or incur spending. In early November, Mastercard announced a partnership with Amber Group, Bitkub and CoinJar to provide crypto-funded Mastercard payment cards in the Asia Pacific region.
PayPal allows customers to trade crypto assets through its digital wallet. Last year, it launched a service that allows customers to buy, sell and hold cryptocurrency directly from their PayPal account. PYPL has an offering in a place called Checkout with Crypto, which aims to facilitate seamless online purchases using cryptocurrencies. In August 2021, PayPal unveiled its cryptocurrency service in the UK, marking its entry into the country’s cryptocurrency market.
Price performance and Zacks ranking
Visa shares are up 1.9% in the past year versus the industry’s 20% decline.
Image source: Zacks Investment Research
The company currently has Zacks ranked No. 3 (Hold). you can see The full list of Zacks #1 stocks (strong buy) today is here.
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Mastercard Incorporated (MA): Free Stock Analysis Report
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