Credit cards colossus Mastercard (MA:NYSE) hiked its third quarter shareholders dividend by 15.8% and plans a new $11 billion share buyback scheme.

The raise, from $0.57 per share to $0.66, is a statement of intent that the New York-based business plans to use its enormous financial clout to continue its long history of fantastic shareholder returns. Mastercard has averaged returns on equity and capital employed of 125% and 48% respectively over the past five years.

OOZING HIGH QUALITY

The global credit and debit card monster oozes high-quality, sustainable growth, and some of the most respected fund managers in the world agree. Terry Smith-founded Fundsmith Equity (B41YBW7) bought a stake last year, although it is not one of the fund’s top 10 holdings currently.

Why Mastercard is a great stock for investors young and old

It does appear in the leading stakes of the Blue Whale Growth Fund (BD6PG78), while legendary investor Warren Buffett owns a rough $1.6 billion stake through Berkshire Hathaway (BRK:NYSE).

While the third quarter payout goes ex-dividend on 8 January 2024 and won’t get paid until February, the scale of the rise signals an acceleration of dividends this year compared to consensus expectations.

Warren Buffett and Terry Smith back Mastercard / Image source: Adobe

Annual dividend payouts rose 10% and 11.4% in 2021 and 2022 respectively, with analyst consensus for 2023 of $2.19 implying 11.7% growth.

PAYOUT ABOVE CONSENSUS?

Based on this latest dividend, investors could be handed $2.46 per share of dividends for fiscal year 2023, which would be more than 12% above current expectations, albeit implying a modest income yield of 0.6%.

The new buyback programme will kick-off once the existing $9 billion share repurchase scheme is complete. As of 1 December 2023, about $3.5 billion remains available for repurchase.

Disclaimer: The author of the article (Steven Frazer) owns a personal investment in Fundsmith Equity and Blue Whale Growth

---