August 11, 2022

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Singularly Wondrous Business

Mastercard Vs. Visa: One Is The Better Bear Market Buy

8 min read

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The 2022 bear market has been devastating for some of the hottest tech names of the pandemic.

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Ben Carlson

If you were expecting the tech bubble to pop and a valuation reckoning to teach an important lesson to new retail investors, you were right and here it is.

  • According to Lipper Financial 1/3 of the Nasdaq is down 70+%

But the great tech crash of 2022 is also offering incredible blue-chip bargain hunting opportunities in some of the world’s greatest Ultra SWAN hyper-growth names.

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Ycharts

Mastercard (NYSE:MA) and Visa (NYSE:V) are two hyper-growth dividend growth blue-chips that have made investors incredible wealth and grown their dividends at remarkable rates.

Total Returns Since April 2008

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Portfolio Visualizer Premium

MA and V have delivered Buffett-like 20+% annual returns for the last 14 years, putting the S&P 500 and Nasdaq to shame.

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Portfolio Visualizer Premium

MA and V have delivered 2X to 2.5X the inflation-adjusted returns of the Nasdaq and 3X to 4X higher real returns than the S&P 500.

And as far as dividend growth goes, it’s hard to find more impressive growth rates.

Portfolio 2009 Income Per $1,000 Investment 2021 Income Per $1,000 Investment Annual Income Growth Starting Yield 2021 Yield On Cost
Nasdaq $5 $44 19.87% 0.5% 4.4%
Visa $7 $94 24.17% 0.7% 9.4%
Mastercard $3 $84 32.01% 0.3% 8.4%

(Source: Portfolio Visualizer Premium)

24% to 32% dividend growth over the last 12 years is absolutely stunning, turning a modest 0.3% to 0.7% yield in 2009 into a potentially life-changing 8.4% to 9.4% yield on cost in 2021.

But of course, you can’t buy future returns. Fortunately, both Visa and Mastercard are rich retirement dream stocks, that are trading at attractive valuations.

But in case you can’t afford to buy both, let me show you why Visa and Mastercard are both worth buying for the long-term and why in my opinion, Mastercard is the better bear market hyper-growth dividend growth blue-chip buy today.

Why You Should Consider Buying Visa Today

Further Reading

  • Why The Visa Stock Should Be Part Of Your Investment Portfolio For Retirement

Reasons To Potentially Buy Visa Today

  • 99% quality low-risk 13/13 hyper-growth Ultra SWAN
  • 5th highest quality on the DK Masterlist: 99th percentile among the world’s best companies
  • 0.7% very safe yield
  • 100% dividend safety score
  • 14-year dividend growth streak (every year since IPO)
  • 0.5% average recession dividend cut risk
  • 1.0% severe recession dividend cut risk
  • 9% historically undervalued (potential good buy)
  • Fair Value: $233.72
  • 28.5X forward PE vs 27.5 to 32.5X historical
  • AA- stable credit rating = 0.55% 30-year bankruptcy risk
  • 80th industry percentile risk management consensus = very good
  • 16.5% CAGR growth consensus
  • 5-year consensus total return potential: 13% to 20% CAGR
  • base-case 5-year consensus return potential: 18% CAGR 4X S&P consensus)
  • consensus 12-month total return forecast: 26% (bullish)
  • Fundamentally Justified 12-Month Returns: 10% CAGR

Visa 2024 Consensus Total Return Potential

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FAST Graphs, FactSet Research

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FAST Graphs, FactSet Research

If Visa grows as expected and remains at historical fair value, it could deliver Buffett-like 17% annual returns over the next three years.

Visa 2027 Consensus Total Return Potential

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FAST Graphs, FactSet Research

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FAST Graphs, FactSet Research

If Visa grows as expected through 2027 it could deliver 18% annual returns or 137%.

  • Buffett-like returns
  • 4X the S&P 500 consensus

Investment Strategy Yield LT Consensus Growth LT Consensus Total Return Potential Long-Term Risk-Adjusted Expected Return Long-Term Inflation And Risk-Adjusted Expected Returns Years To Double Your Inflation & Risk-Adjusted Wealth

10 Year Inflation And Risk-Adjusted Expected Return

Visa 0.7% 16.50% 17.2% 12.0% 9.5% 7.6 2.48
Nasdaq 1.0% 13.9% 14.9% 10.4% 7.9% 9.1 2.14
Dividend Aristocrats 2.2% 8.9% 11.1% 7.8% 5.2% 13.8 1.66
S&P 500 1.7% 8.5% 10.2% 7.1% 4.6% 15.7 1.57

(Sources: Morningstar, FactSet, Ycharts)

Over the long-term analysts expect Visa to keep beating the Nasdaq along with virtually every major investment strategy on Wall Street.

Inflation-Adjusted Consensus Return Potential: $1,000 Initial Investment

Time Frame (Years) 7.7% CAGR Inflation-Adjusted S&P Consensus 8.7% Inflation-Adjusted Dividend Aristocrats Consensus 14.7% CAGR Inflation-Adjusted Visa Consensus Difference Between Inflation Adjusted Visa Consensus Vs S&P Consensus
5 $1,445.67 $1,514.08 $1,980.94 $466.86
10 $2,089.97 $2,292.44 $3,924.10 $1,631.67
15 $3,021.42 $3,470.93 $7,773.40 $4,302.47
20 $4,367.98 $5,255.26 $15,398.60 $10,143.33
25 $6,314.67 $7,956.89 $30,503.63 $22,546.74
30 $9,128.95 $12,047.36 $60,425.71 $48,378.35

(Source: DK Research Terminal, FactSet)

Even if Visa only grows as expected for 10 years that’s potentially 4X inflation-adjusted returns or 2X what analysts expect from the S&P 500.

Time Frame (Years) Ratio Aristocrats/S&P Ratio Inflation-Adjusted Visa Consensus Vs S&P Consensus
5 1.05 1.37
10 1.10 1.88
15 1.15 2.57
20 1.20 3.53
25 1.26 4.83
30 1.32 6.62

(Source: DK Research Terminal, FactSet)

Visa Investment Decision Score

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DK

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(Source: DK Automated Investment Decision Tool)

For anyone comfortable with its risk profile, Visa is as close to a perfect hyper-growth Ultra SWAN dividend growth opportunity.

  • 9% discount vs 3% market premium = 12% better valuation
  • much higher quality and far superior dividends safety
  • 70% higher long-term return potential than S&P 500 overtime
  • about 2X better risk-adjusted expected return over the next five years

Why You Should Consider Buying Mastercard Today

Full Deep Dive Analysis

  • Mastercard: This Buffett-Style Blue-Chip Could Potentially Triple In The Next 5 Years

Reasons To Potentially Buy Mastercard Today

  • 100% quality low-risk 13/13 hyper-growth Ultra SWAN
  • 3rd highest quality company on the DK Masterlist: 100th percentile among the world’s best companies
  • 0.5% very safe yield
  • 100% dividend safety score
  • 10-year dividend growth streak (every year since IPO)
  • 0.5% average recession dividend cut risk
  • 1.0% severe recession dividend cut risk
  • 2% historically undervalued (potential good buy)
  • Fair Value: $366.54
  • 34.1 forward PE cash flow vs 28.5 to 34.5X historical
  • A+ stable credit rating = 0.6% 30-year bankruptcy risk
  • 82nd industry percentile risk management consensus = very good
  • 24.3% CAGR growth consensus
  • 5-year consensus total return potential: 18% to 26% CAGR
  • base-case 5-year consensus return potential: 9.5% CAGR 1.5X S&P consensus)
  • consensus 12-month total return forecast: 20% (bullish)
  • Fundamentally Justified 12-Month Returns: 2% CAGR

Mastercard 2024 Consensus Total Return Potential

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FAST Graphs, FactSet Research

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FAST Graphs, FactSet Research

If MA grows as expected and remains at historical fair value, it could deliver very attractive 13% annual returns over the next three years.

Mastercard 2027 Consensus Total Return Potential

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FAST Graphs, FactSet Research

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FAST Graphs, FactSet Research

If MA grows as expected through 2027 it could deliver 21% annual returns or almost 200%.

  • Buffett-like returns
  • 5X the S&P 500 consensus
  • almost 3X your money

Investment Strategy Yield LT Consensus Growth LT Consensus Total Return Potential Long-Term Risk-Adjusted Expected Return Long-Term Inflation And Risk-Adjusted Expected Returns Years To Double Your Inflation & Risk-Adjusted Wealth

10 Year Inflation And Risk-Adjusted Expected Return

Mastercard 0.5% 24.30% 24.8% 24.8% 22.3% 3.2 7.46
Visa 0.7% 16.50% 17.2% 12.0% 9.5% 7.6 2.48
Nasdaq 1.0% 13.9% 14.9% 10.4% 7.9% 9.1 2.14
Dividend Aristocrats 2.2% 8.9% 11.1% 7.8% 5.2% 13.8 1.66
S&P 500 1.7% 8.5% 10.2% 7.1% 4.6% 15.7 1.57

(Sources: Morningstar, FactSet, Ycharts)

Over the long-term analysts expect Mastercard to potentially crush Visa, the Nasdaq, the market, aristocrats, and pretty much every investment strategy on Wall Street.

  • potentially doubling your inflation-and risk-adjusted wealth every 3.2 years

Inflation-Adjusted Consensus Return Potential: $1,000 Initial Investment

Time Frame (Years) 7.7% CAGR Inflation-Adjusted S&P Consensus 8.7% Inflation-Adjusted Dividend Aristocrats Consensus 22.3% CAGR Inflation-Adjusted Mastercard Consensus Difference Between Inflation Adjusted Mastercard Consensus Vs S&P Consensus
5 $1,445.67 $1,514.08 $2,730.51 $1,216.43
10 $2,089.97 $2,292.44 $7,455.70 $5,163.27
15 $3,021.42 $3,470.93 $20,357.90 $16,886.97
20 $4,367.98 $5,255.26 $55,587.53 $50,332.26
25 $6,314.67 $7,956.89 $151,782.50 $143,825.61
30 $9,128.95 $12,047.36 $414,444.17 $402,396.81

(Source: DK Research Terminal, FactSet)

Even if MA only grows as expected for 10 years that’s potentially 7.5X inflation-adjusted returns or almost 4X what analysts expect from the S&P 500.

Time Frame (Years) Ratio Aristocrats/S&P Ratio Inflation-Adjusted Mastercard Consensus Vs S&P Consensus
5 1.05 1.89
10 1.10 3.57
15 1.15 6.74
20 1.20 12.73
25 1.26 24.04
30 1.32 45.40

(Source: DK Research Terminal, FactSet)

MA Investment Decision Score

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DK

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(Source: DK Automated Investment Decision Tool)

For anyone comfortable with its risk profile, MA is as close to a perfect hyper-growth Ultra SWAN dividend growth opportunity.

  • 2% discount vs 3% market premium = 5% better valuation
  • much higher quality and far superior dividends safety
  • 150% higher long-term return potential than S&P 500 overtime
  • about 3X better risk-adjusted expected return over the next five years

Why Mastercard Is The Better Bear Market Blue-Chip Buy Today

Company Visa Mastercard Visa Wins

Mastercard Wins

Yield 0.7% 0.5% 1
LT Growth Consensus 16.5% 24.3% 1
Total Return Potential 17.2% 24.8% 1
LT Risk-Adjusted Expected Return 12.0% 17.3% 1
Historical Total Return 20.9% 22.2% 1
12-Month Consensus Total Return Potential 25.4% 19.7% 1
12-Month Fundamentally Justified Total Return Potential 10.0% 2.0% 1
Discount To Fair Value 9% 2% 1
DK Rating Good Buy Good Buy 1 1
Automatic Investment Decision Score 100% 100% 1 1
Quality Score 99% 100% 1
Safety Score 100% 100% 1 1
Dependability Score 99% 100% 1
Long-Term Risk-Management Industry Percentile 80% 82% 1
Credit Rating AA- Stable A+ Stable 1
30-Year Bankruptcy Risk 0.55% 0.60% 1
Dividend Growth Streak (Years) 14 10 1
Return On Capital (12-Months) 660% 602% 1
Return On Capital Industry Percentile 96% 95% 1
Return On Capital (13-Year Median) 501% 830% 1
Return On Capital (5-Year trend) 5.2% -11% 1
Sum 13 11

(Source: DK Research Terminal, FactSet, GuruFocus Premium)

Visa actually slightly edges out Mastercard when it comes to an overall summary of safety, quality, profitability, and valuation.

However, here’s why I still like Mastercard slightly more, and recently bought it for my retirement portfolio during the bear market.

  • So did my father in his 401(k)

It comes down to one main reason. Mastercard is smaller than Visa and thus likely has more years of stronger growth ahead of it.

Inflation-Adjusted Consensus Return Potential: $1,000 Initial Investment

Time Frame (Years) 7.7% CAGR Inflation-Adjusted S&P Consensus 14.7% Inflation-Adjusted Visa Consensus 22.3% CAGR Inflation-Adjusted Mastercard Consensus Difference Between Inflation Adjusted Mastercard Consensus – Visa Consensus
5 $1,445.67 $1,980.94 $2,730.51 $749.58
10 $2,089.97 $3,924.10 $7,455.70 $3,531.60
15 $3,021.42 $7,773.40 $20,357.90 $12,584.50
20 $4,367.98 $15,398.60 $55,587.53 $40,188.93
25 $6,314.67 $30,503.63 $151,782.50 $121,278.87
30 $9,128.95 $60,425.71 $414,444.17 $354,018.46

(Source: DK Research Terminal, FactSet)

Over the next decade, if both companies grow as expected, analysts expect MA to deliver close to 8X inflation-adjusted returns, about twice what they expect from Visa.

Time Frame (Years) Ratio MA/V Consensus
5 1.38
10 1.90
15 2.62
20 3.61
25 4.98
30 6.86

(Source: DK Research Terminal, FactSet)

Bottom Line: Both Visa And Mastercard Can Help You Retire Rich, But Mastercard Is The Slightly Better Buy Today

If you can afford to buy both companies, thanks to fractional shares and commission-free trades, it’s a great idea to do so.

Owning either company is not about immediate income but maximizing long-term dividend income and wealth.

And when it comes to hyper-growth both Visa and Mastercard have incredibly long growth runways ahead of them.

You can’t go wrong with either of them, in terms of quality, safety, fortress balance sheets, long-term risk management, and long-term dividend growth potential.

But ultimately Mastercard is a much faster-growing company and over the next 10+ years that could result in 2X better returns for Mastercard shareholders, who are likely to see much faster dividend growth as well.

This is why Mastercard is my higher priority hyper-growth Ultra SWAN in this bear market.

I can’t promise you that either company will make you money in the short-term, especially if the market isn’t done selling off.

  • Citigroup and Morgan Stanley think the market isn’t done bottoming yet

But what I can say with 80% confidence is that anyone buying Visa and Mastercard today is likely to be pleased with the result in 5+ years and potentially euphoric in the next 10+ years.

Fortunes are made by buying right and holding on.” – Tom Phelps

It’s better to buy a wonderful company at a fair price than a fair company at a wonderful price.” – Warren Buffett

Anyone buying Mastercard or Visa today is practicing disciplined financial science and can trust that their hard-earned savings are in very good hands.

If we get a recession in 2023 or 2024, then these are the kinds of world-class Ultra SWANs that will not just likely keep growing their dividends at impressive rates, but also help you retire in safety and splendor.