Mastercard (NYSE:MA) is the second-largest credit card company on the planet by market capitalization, just behind VISA. Credit card companies experienced phenomenal growth over the course of the 2010s as consumers around the globe took advantage of a strong worldwide economy. Moreover, borrowing costs were low with interest rates hovering around historic lows.
Unfortunately, that rosy picture has been cast aside due to the events that have rocked the political, social, and economic climate in the first half of the 2020s. The COVID-19 pandemic evolved into a generation health crisis through 2020 and 2021. The arrival of vaccines allowed for a return to normal, but investors were then faced with a new challenge in the form of soaring inflation.
Policymakers responded to multi-decade high inflation rates with the most aggressive interest rate hikes since the early 2000s. The U.S. Federal Reserve and Bank of Canada have succeeded in taming interest rates, but consumers are being squeezed hard. Credit card delinquencies have climbed to the highest rate since the Great Recession.
Despite this challenging climate, Mastercard is thriving. The company recently announced a quarterly dividend hike by 16% to $0.66 per share. Meanwhile, shares of Mastercard have climbed 17% so far in 2023 as of close on Tuesday, December 5. The company’s board of directors recently approved a whopping $11 billion share-repurchase plan, which should make shareholders happy going forward. At the same time, this is a stock to watch as delinquencies rapidly rise.
