Two large-cap stocks, Mastercard Inc. (MA, Financial) and Avangrid Inc. (AGR, Financial), announced quarterly dividends on Tuesday, adding another tally to their long history of distributed earnings.
Mastercard
Mastercard shares were slightly up 0.67% at $289 per share in after-hours trading on Tuesday after the company announced a 40 cents quarterly cash dividend per common share, which represents a 21.2% increase from the previous payment.
The transaction processing provider will pay the quarterly dividend to its shareholders on Feb. 7, 2020. In order to benefit, investors must be on the company’s record not later than Jan. 9. The ex-dividend date is scheduled for Jan. 8.
Based on Tuesday’s closing price of $287.09, the payment generates a 0.46% yield in terms of both forward and trailing 12-month dividend.
Mastercard has continuously paid quarterly dividends since Nov. 10, 2006 and increased them since 2011, creating a 23% hike in the trailing 12-month dividend per share over the past five years.
Mastercard sustains the quarterly dividend with $5.85 billion available in cash on hand as of Sept. 30, plus about $6.5-$7 billion in total cash inflows that operations generates every 12 months.
The dividend has been the main catalyst to the share price of Mastercard as the stock has grown 222.3% over the same span of five years to levels that are overvalued according to the Peter Lynch chart.
Regardless of what may appear as an expensive valuation, Wall Street continues to recommend buying shares of Mastercard with a target share price of $314.22, reflecting a 9.4% upside.
The stock has a market capitalization of $290.24 billion, a price-earnings ratio of 42.68, a price-book ratio of 58.71 and a price-sales ratio of 18.17.
Avangrid
Avangrid shares were unchanged at $48.51 in after-hours trading on Tuesday after the company announced a 44 cents quarterly cash dividend per common share, which is in line with the previous payment.
The Orange, Connecticut-based distributor of electricity and natural gas in the US region of New England will pay the quarterly dividend to its shareholders on Jan. 2, 2020. Investors must be recorded as Avangrid’s shareholders before Dec. 12. The ex-dividend date is scheduled for Dec. 11.
Based on Tuesday’s closing share price, the quarterly dividend generates a 3.63% yield for both the forward and trailing 12-month dividend compared to S&P 500's yield of 1.84%.
The company has paid dividends since October 2000 and increased them since 2017.
Avangrid funds the payment of the quarterly dividend thanks to the availability of $103 million in cash on hand and cash inflows of about $1.5-$1.9 billion that the company can generate from 12 months of operations.
The trailing 12-month dividend per share grew 1.85% from 2014 to 2019, increasing approximatelty 0.37% every year over the five-year period and pushing the stock price up 46.21% to what the Peter Lynch chart considers a fair value.
Sell-side analysts estimate the stock will underperform within 12 months, so they have produced an average target price of $49.81, reflecting a slim 2.2% upside from Tuesday’s closing share price.
The stock has a market capitalization of $14.99 billion, a price-earnings ratio of 25.27, a price-book ratio of 0.99 and a price-sales ratio of 2.35.
Disclosure: I have no positions in any securities mentioned.
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