Visa Hikes Dividend by 20% - Analyst Blog

Yesterday, the leading card payment processing company, Visa Inc. (V), announced that it has increased its quarterly dividend by a substantial magnitude of 20%, thereby increasing it to 15 cents from 12.5 cents. The newly raised dividend will be paid on December 7, 2010, to the company's Class A, Class B and Class C common shareholders on record as on November 19, 2010.

This is the second consecutive dividend increment, raising its annual dividend to 60 cents from 50 cents. In 2009, Visa increased its annual dividend by about 19% from 2008, thereby hiking it annually from 42 cents to 50 cents.

Estimate Trend Revision

Over the last 30 days, two of the 27 analysts covering the stock have raised their estimates for the third quarter of 2010, while one downward revision was witnessed. Currently, the Zacks Consensus Estimate for the third quarter is operating earnings of 94 cents per share, which would be up by 27.3% from the year-ago quarter, based on a strong top line growth outlook.

The higher number of upward estimate revisions for the third quarter indicates a likelihood of upward pressure on the performance of the stock in the near term.

With respect to earnings surprises, the stock has been steady over the last four quarters, with all four positive surprises. The average remained positive at 5.70%. This implies that Visa has surpassed the Zacks Consensus Estimate by 5.70% over that period.

Besides, the upside potential for the estimate for the third quarter, essentially a proxy for future earnings surprises, currently stands at 0.63%.

Visa's dividend hike has come just ahead of its fiscal fourth quarter and annual 2010 financial results, scheduled to release after the market closes on October 27, 2010. The company continues to drive growth through increased payment volumes along with consistent growth in processed transactions. Visa benefits from strong secular demand growth, meaningful international exposure, high barriers to entry, excellent pricing power and impressive operating leverage.