Despite a major market sell-off, several components of the Dow Jones industrial average are up over 20%. The leader among these is Visa Inc. (NYSE: V), which is 22.3% higher so far this year, with Microsoft Corp. (NASDAQ: MSFT) and Travelers Companies Inc. (NYSE: TRV) close behind with gains of less than 22%.
And the business models are profit machines: Visa and Mastercard generated $10.7 billion and $5.9 billion in net income, respectively, last year, while PayPal made $2.1 billion. Analysts still predict annual earnings growth of 15% to 20% for the next three to five years. Visa and Mastercard each have a small dividend yield of about 0.5%.
Moody’s commented as it upgraded Visa’s senior unsecured rating to Aa3:
The upgrade reflects Moody’s expectation that Visa will continue to benefit from its leading position in retail electronic payments, globally recognized brand, and favorable long-term growth prospects created by the shift to electronic payments from cash and checks worldwide. Visa’s growth will be fueled by faster growth opportunities internationally, which provides some resilience to an economic downturn in the U.S. In addition, Moody’s expects that Visa will remain committed to a conservative debt capital structure with adjusted debt to EBITDA maintained at 1.5x or less, with a balanced capital allocation policy of strategic M&A and shareholder returns.
Most other experts’ comments are similar. The stock seems to have a way to run. Shares hit an all-time high of $165.77 last week, but the analysts’ consensus target price is up at $180.49.
The stock retreated less than 2% in the past week and ended at $161.33 per share. The Dow was down more than 3% in that time.