In partnership with

Big News For A Top Dividend Growth Stock!

The US Department of Justice (DOJ) just announced a lawsuit alleging that Visa is a monopolist. They claim that the company has been involved in anti-competitive tactics to control the debit transactions market.

Curiously, this lawsuit comes just months after Nancy Pelosi sold a substantial amount of Visa shares, valued between $500k - $1 million. Despite this drop, Visa’s stock remains 5% higher than when Pelosi offloaded her shares.

Let’s do this!

Was this email forwarded to you?

Support Our Sponsor

Receive Honest News Today

Join over 4 million Americans who start their day with 1440 – your daily digest for unbiased, fact-centric news. From politics to sports, we cover it all by analyzing over 100 sources. Our concise, 5-minute read lands in your inbox each morning at no cost. Experience news without the noise; let 1440 help you make up your own mind. Sign up now and invite your friends and family to be part of the informed.

Sign up today!

The Key Story

Visa Stock Falls After DOJ Lawsuit, Nancy Pelosi Sold Again

The Allegations Against Visa

The DOJ's case primarily focuses on Visa’s dominant position in the debit transactions market and its use of "client incentives" to maintain its market leadership.

Although the DOJ paints Visa’s tactics as anti-competitive, it’s important to note that these types of partnerships are common across the industry. Mastercard, for instance, engages in similar practices, yet is conspicuously absent from this lawsuit.

Interestingly, the DOJ’s lawsuit doesn’t target Visa’s fees, as the company has been conservative in not raising fees, partly due to scrutiny from regulators. Instead, the case hinges on the broader anti-competitive tactics, which the DOJ argues prevents the rise of competitors in the debit card market.

How Does This Affect Visa as an Investment?

Visa has long been a core holding in my dividend growth stock portfolio, and many of you in the audience likely own it as well. Visa’s wide economic moat and highly scalable business model make it a free cash flow machine, resulting in consistent dividend growth and share repurchases. The fundamentals of Visa remain incredibly strong.

Despite the negative headlines, Visa boasts a 13.4% ten year compound annual growth rate (CAGR) in revenue per share over the last decade, an 80% gross margin, and a 54% net margin. Free cash flow per share has grown at an impressive 25.7% ten year CAGR, and its dividend has increased by nearly 18% annually over the past 10 years. Even with the ongoing DOJ scrutiny, Visa remains a strong, stable company with robust growth prospects.

Should You Buy the Dip?

If Visa's stock continues to slide, this could be a compelling buying opportunity. With projections indicating 10–15% earnings per share growth over the next five years, Visa could see its stock trading at a 15.8 P/E ratio by 2028, based on estimated earnings of $17.24 per share. Furthermore, Wall Street analysts have set a price target of $290.8, meaning Visa could be 6.61% undervalued at current levels.

While the DOJ’s lawsuit introduces some risk, Visa's dominant market position and growth trajectory remain intact. If Visa stock falls into the $260 range or lower, I may look to add to my position, as the company’s long-term outlook is still strong. As always, lawsuits like this could drag on for months or even disappear altogether, especially with the possibility of a new U.S. administration post-election.

Final Thoughts

Visa is undeniably a market leader with a strong competitive advantage, and this lawsuit, while significant, doesn't change the core fundamentals of the business. In the meantime, this could represent a buying opportunity for long-term investors who are comfortable with some short-term uncertainty.

Thanks for the read! Let me know what you thought by replying back to this email.

— Zach

Disclaimer: Dividend Dividend (Dividend Data LLC) is not a professional financial service. All materials released from Dividend Data (Dividend Data LLC) are for educational and entertainment purposes. Dividend Data (Dividend Data LLC) is not a replacement for a professional's opinion. Contributors to the Dividend Data (Dividend Data LLC) might have equities mentioned in the newsletter