Mastercard Incorporated (MA): Among the Best Dividend Stocks to Invest In Now According to Warren Buffett

As an investor, you're always on the lookout for companies that offer a combination of strong financials, impressive growth, and attractive dividends. One such company that has caught the eye of legendary investor Warren Buffett is Mastercard Incorporated (MA). In this article, we'll delve into the specific attributes that make Mastercard an attractive dividend stock in Buffett's portfolio.



Strong Financials and Profitability

Mastercard has consistently demonstrated favorable financial positions, with an average operating margin of 56.1% over the past five years. In the last nine months, the company raked in over $9.9 billion in cash flow from operations, using the proceeds to pay dividends and repurchase shares. This pristine financial condition is likely something that Buffett and his team hold in high regard.

One of the most striking aspects of Mastercard's financials is its lofty profitability metrics. During the latest quarter, the card payments giant posted an operating margin of 58.3%, which is just outstanding and compared favorably to Apple's 29.2% as of the end of June. This impressive profitability is a testament to the company's strong business model and efficient operations.

Dividend Growth and Payout Ratio

Mastercard has a history of increasing its dividends, with a 10-year compound annual growth rate (CAGR) of 16.7% in dividends per share. This is higher than the average CAGR of 10.5% for dividend stocks in the financial sector. Additionally, Mastercard's payout ratio is 16%, which is lower than the sector average of 34%. This indicates that Mastercard's dividends are well-covered by earnings and are sustainable.



Economic Moat and Network Effects

Mastercard benefits from powerful network effects, with a card base of 3.1 billion and 130 million merchant locations accepting Mastercard. This extensive network creates a powerful barrier to entry for competitors, ensuring the company's long-term profitability and ability to maintain and grow its dividend payments.

The network effects of Mastercard's business model are particularly evident in its ability to maintain and grow its dividend payments. As the company's network of merchants and cardholders expands, so does its revenue and profitability. This growth, in turn, enables Mastercard to increase its dividend payments to shareholders.

Conclusion

Mastercard Incorporated (MA) is an attractive dividend stock in Warren Buffett's portfolio due to its strong financials, impressive profitability, dividend growth history, and economic moat. By investing in Mastercard, you can benefit from the company's impressive track record and secure a steady stream of income through its dividend payments. As always, it's essential to conduct thorough research and consider your personal financial situation before making any investment decisions.