MasterCard Or Visa; What's The Better Investment?

       Look in your wallet- chances are your credit card has a MasterCard or Visa logo on them. They are the two largest credit card providers in the world. But what  you may not know is that they don't actually lend credit to consumers. So if they aren't making money from interest rates like American Express and Discover do on credit cards.. How do they make money?

       They are not the company that approves or declines your transaction- the bank issuing the debit or credit does that. They make money by processing payments. On the average transaction- the merchant received 98% of the transaction value. That leaves 2% for the banks and the payment processors.

        Their piece of the two percent transaction fee is even smaller. But it adds up fast.


1. Which is more popular?
Visa has the larger market share- they have 48% of the cards on the market.. Nearly more than the next three card issuers combined (MasterCard, American Express and Discover). MasterCard is in second- commanding 31.3% of the cards in the market.

Despite Visa being the more common card- MasterCard is accepted in more countries. 10 more countries to be exact. But is that necessarily a good thing? I mean if Visa is the more common card and haven't even reached full potential.. Doesn't that give them more of an upside?

Advantage- Visa.

2. Company financials 

Here are the increases between 2014 and 2017 of the main financials I look at when investing in A company

Cash and cash equivalents increase,
MasterCard- 17%
Visa- 204%

Just four years ago in 2014 MasterCard had 3 billion dollars more than Visa.. Fast forward to 2017 Visa now has more liquid assets by nearly four billion dollars.

Total Assets increase.
MasterCard- 25%
Visa- 98%

With a 200% increase in cash- it's no mystery why their assets have grown nearly 4x as fast as MasterCard.

Liabilities increase
MasterCard- 85%
Visa- 98%

MasterCard has not had to take out loans for business deals, research and developments etc. which may be why Visa has been able to amass a large amount of cash and assets.

Net Income increase

MasterCard- 8%
Visa- 23%

This is one of the most important numbers A company releases.. This is the amount of money A company makes after cost of revenue is deducted. Even though Visa has MasterCard beat- anytime this number is increasing positively over years- It's A great sign.

Total Revenue

MasterCard- 32%
Visa- 44%

Visa has had a larger increase in total revenue coming in.

Advantage- Visa

3. Dividends

Both companies pay a boring quarterly dividend. MasterCard is yielding a .45% dividend and Visa is yielding .56%. Even though both are yielding A low dividend- it's a healthy dividend that could be increased as the companies get out of their growth stage.

Both companies have a payout ratio under 25%

Visa's is 19.07% and MasterCard's is 21.07%.

Advantage- Visa

4. Recent performance 

Both companies have had a great year, MasterCard is up 50% in the last year and Visa is up 38%.

Both companies have beaten earnings per share expectations for the last four quarters. MasterCard by $.51 and Visa by $.34

MasterCard has a one year target of $232, which represents an 8.79% increase of the current share price of $213.26.

Visa on the other hand has A target price of $162- Which is an increase of 11% on the current price of $145.

Advantage- MasterCard.

5. The Winner is
This depends one what your looking for.. Visa offers a higher upside in an untapped market- but MasterCard offers for a safer long term bet as they have A lower amount of debt to worry about.

I currently own Visa but I do like what MasterCard has done. I will add shares of both of them and continue to monitor them. These will both be return monsters the next few years.


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