Visa to profits

Payment facilitator Visa (NYSE: V) can be purchased and set on cruise control for a long time. Driven by payment-processing fees, Visa keeps generating income as the U.S. and global economies grow. It’s a numbers game, and Visa is on the winning side over the long run. Visa’s success is also a reflection of its focus on payment processing and avoidance of lending. While some of its peers have chosen to run both businesses during periods of economic expansion, allowing them to collect interest income as well as processing fees, Visa has declined to join them. It’s been a smart move, because inevitable recessions and economic contractions lead to rising credit delinquencies and chargeoffs. Since Visa doesn’t lend, rising credit delinquencies have little to no impact on its business. This is a major reason that its recent profit margin has often been above 45 percent. The financial services company is going through a rough patch right now: The pandemic has depressed spending, while border closures have led to plunging crossborder transaction volumes. But the pandemic is also pushing many countries and businesses to adopt digital payments, thereby benefiting Visa’s business of facilitating digital payment transactions. Visa’s dividend yield was recently only 0.6 percent, but it has hiked its payout by an annual average of 18 percent over the past five years.