MasterCard, Visa earnings rotate plastic into cash

Transaction processors Visa Inc and MasterCard Inc are both huge, predictable cash generators that are ready to return more money to shareholders by buying back shares. Yet the world’s two largest debit and credit card networks are skimping on their dividend payouts.

Visa and MasterCard escaped the worst of the financial crisis with billions of dollars each in unrestricted cash, and analysts expect their piles to continue growing. Both have spent some of that money on acquisitions this year, and each recently committed to $ 1 billion in share buybacks.

But the two networks have some of the smallest dividend yields — 0.7 percent for Visa and 0.3 percent for MasterCard — among companies with big stockpiles.

MasterCard in particular could pay its dividend 27 times over based on its forward cash flow, according to Thomson Reuter’s data.

“I would like to see increased dividends. It would be a way to differentiate themselves especially versus other financial services, because many of the banks are unable to increase their dividends,” said Matt McCormick, portfolio manager with Bahl & Gaynor, who owns Visa shares.

Both Visa and MasterCard “have the ability” to increase their payouts in the next year, McCormick said. But he is more optimistic that Visa, which raised its dividend by 20 percent in October, will do so again.

MasterCard has not raised its dividend since 2007.

Spokeswoman Jennifer Stalzer said in an email that the company is “committed to return cash to our shareholders if we don’t reinvest it back into the business, with a current preference for share repurchases over dividend increases.”

Some investors are hesitant to demand immediate dividend increases in the midst of ongoing regulatory and legal uncertainty. Both companies are awaiting U.S. rules that could restrict their profits. They are also facing a long-simmering merchants’ lawsuit over their processing rules and fees.

MasterCard, which went public two years before Visa, is as a result more exposed to the lawsuit and needs to reserve more cash against a potential settlement, analysts said. Both companies also need to keep some cash at hand to backstop their bank partners through technological glitches, although those reserves are much smaller than the stashes at banks.

But once the regulatory and legal clouds clear, most shareholders are expecting a reward for their patience.

“Until we get some clarity behind these regulatory issues, the prudent thing for them to do is to hold tight,” said Michael Nix, principal at Greenwood Capital Associates, which owns Visa shares. “Once that clarity’s there and we understand the financial impact, you can clearly assess what they can afford to do to.”

Jim Tierney, chief investment officer of money management firm W.P. Stewart, called the companies’ recent stock buyback plans “absolutely appropriate” and said he prefers that type of return to an increased dividend.

“Once you start a dividend policy, you’re really locked in to that. It’s not one of those things you can fall back on” if conditions worsen, said Tierney, whose firm includes MasterCard and Visa shares in its $ 1.5 billion of assets under management.

Question by feltonfan: Does Visa MasterCard Gift Cards work with PayPal?
Can you link a prepaid mastercard gift card with PayPal? If so, how?

Best answer:

Answer by travelmaster
Using Visa or American Express Gift Cards on Paypal

Kwame Kuadey on January 16th, 2009 22

One of the most popular gift card questions online is whether one can link prepaid gift cards like the Visa gift card to a PayPal account. The short answer is Yes and No.

Now, the long answer: Yes, it is possible to link a prepaid gift card like the Visa or American Express gift card to a PayPal account but for this to happen, you need to pray and hope that PayPal does not require you to go through their Expanded Use verification process. To better understand why, you first need to be familiar with the process for linking a credit card to a PayPal account. When you link your credit card to a PayPal account, PayPal will attempt to confirm your address with your credit card company. If the credit card company is not able to confirm your address, then you may be asked by PayPal to complete their Expanded Use enrollment process in order to activate your credit card.

Expanded Use verification means PayPal will charge your credit card a small about. Next to the charge will be a unique, randomly generated 4-digit Expanded Use code. If you have online access to your credit card activity, the charge and code will appear on your card activity in approximately 2-4 business days. If you do not have online access, you must wait until you receive your statement in the mail to get the 4-digit code. If you are adding a debit card to your PayPal account, your 4-digit Expanded Use code will be printed on your bank statement next to the charge.

Once you get the 4-digit code, you have to return to your PayPal account to enter the code per instructions from PayPal. Once completed, and PayPal confirms that you entered the correct code, you will now be able to use the card for PayPal transactions. The Expanded Use verification process is designed to protect you against fraud by verifying that the person attempting to use the credit card actually owns the card. PayPal will later credit the amount charged to your card to your PayPal account.

Now, here lies the problem with using prepaid or bank issued gift cards. If PayPal is unable to verify your address with the gift card issuer, then you may be asked to go through the Expanded Use process. Since most prepaid gift cards do not issue monthly statements or provide online access to gift card transactions, it will be impossible to complete the Expanded Use process. Also, it is not a good idea to call the credit card or gift card issuer to get the 4-digit Expanded Use code. If PayPal receives a complaint from your card issuer that you called them to get the 4-digit code, PayPal will close your account permanently.

So, the first step to attempting to use a prepaid gift card on PayPal is to make sure the name and address (billing address) on your PayPal account matches the name and address on file with the gift card issuer. If you just purchased your prepaid gift card, call the card issuer and add your name and address to the card. If your information (name and address) has changed since you registered your card, call the card issuer or go online and update your information before you use the card on PayPal.

Once this is done, you just have to hope that PayPal is able to successfully verify your address with the gift card issuer. If they are able to verify your address, then you are all set. If they cannot verify your address with the card issuer, then you probably will not be able to use that gift card on PayPal.

Add your own answer in the comments!