Dividend and growth in one: the 3 most interesting financial companies
Financial services are a key part of the U.S. economy, worth nearly $2 trillion. This sector is a great place for long-term investment. After all, America would not have become the economic miracle it is today without its robust and innovative financial system.
Those seeking dividends need not sacrifice growth potential for passive income. So here are three quality companies with a history of market returns that you can hold for decades.
Visa $V-1.1%
Visa
VPayment cards are a way of life in the US. According to research from The Motley Fool, nine in 10 Americans have at least one debit card and eight have at least one credit card. Visa is the leading payment network both in the U.S. and globally. The company's business model is ingenious; it earns a small fee every time someone pays with a card or digital wallet with the Visa logo.
People around the world are increasingly moving away from cash, which has fueled Visa's growth for decades. Last year, the company generated $32.7 billion in revenue on $12.3 trillion in payment volume. But the story doesn't end there. Researchers expect payment volumes to grow by trillions of dollars in the coming years, especially in emerging markets. This is great news for Visa because of its global reach.
Visa's dividend has tremendous power. It has grown an average of 18% per year over the past decade and is on a 16-year growth streak that began at its IPO. The growth needed to sustain such rapid dividend growth also delivers excellent investment returns. Visa stock has easily outperformed the S&P 500 index over the company's lifetime. The growth trends of cashless payments and a modest dividend payout ratio of 22% should make Visa a reliable wealth creator for many years to come.
Jack Henry & Associates $JKHY-0.8%
A small group of megabanks dominates the financial sector, but over 4,000 small and mid-sized banks and credit unions play a key role in the U.S. economy. Jack Henry & Associates provides a variety of payment processing services, software and technology solutions to these banks, which typically don't have the resources to build competitive technology in-house. Jack Henry & Associates' products, which are critical to the banks' operations, create stable revenue and competitive advantage.
The company's dividend growth is a testament to its resilience. Jack Henry & Associates has paid and increased its dividend for 34 consecutive years, which means it increased it during COVID-19 and the Great Recession of 2008-2009, arguably the most difficult banking environment since the 1930s. The company's prudent management deserves credit for that. The company maintains a conservative dividend payout ratio of around 40% and has very little debt.
Jack Henry & Associates is not explosive, but its steady growth adds up. The company's stock has outperformed the S&P 500 index for many decades. Analysts expect long-term earnings growth in the higher single-digit percentages, which will continue to fuel future dividend growth.
BlackRock $BLK+2.0%
BlackRock, Inc.
BLKInvestors can rest assured that BlackRock will be around for as long as the global financial system exists. BlackRock is the largest investment management firm in the world, with more than $10 trillion in assets under management. It offers advisory services and investment products, including proprietary funds, which are its specialty.
BlackRock funds own large stakes in many of the world's leading companies. It is important to note that these holdings are owned by BlackRock funds, not the company itself. In other words, these are investments on behalf of BlackRock clients who have put their money into these funds.
BlackRock makes money from a variety of fees, from a share of assets under management to the services provided. Market downturns can hurt the firm; scared investors withdrawing funds and falling asset values sometimes cause problems. However, like the S&P 500 index, BlackRock is still recovering and rising to new heights. This essentially ensures the company's growth, leading to market-beating returns for the entire life of the stock.
The company is poised to remain a solid dividend stock well into the future. BlackRock has paid and increased its dividend for 15 consecutive years, and during 2008-2009 it froze the dividend rather than cut it. Analysts are forecasting double-digit earnings growth of 13% annually, and the payout ratio is already only 51%.
Disclaimer: You will find a lot of inspiration on Bulios, but stock selection and portfolio construction is up to you, so always do a thorough analysis of your own.
Source: Yahoo Finance, CNBC.