► Subscribe for new videos every day!: http://bit.ly/dai_youtube ► Would you rather read this?: https://dividendsandincome.com/2021/05/25/we-just-bought-more-shares-of-mastercard-ma-and-visa-v/ ► Link to the Income Builder Portfolio: https://dailytradealert.com/income-builder-portfolio/ There are plenty of people who might argue that our headline should have read: “We just paid too freakin’ much for more shares of Mastercard (MA) and Visa (V).” After all, Mastercard is trading at almost 50 times this year’s expected earnings, and Visa’s forward P/E ratio is well over 40. Both are approaching historic highs. Despite that fact, I executed purchase orders for about $500 worth of each on behalf of Daily Trade Alert for our Income Builder Portfolio. Purchases of whole shares were done via limit orders. Partial shares were bought using Schwab Stock Slices. It was the third time the IBP has added shares of the credit-card industry’s two dominant players, with the previous transactions coming on April 21, 2020, and May 21, 2020. On each of those occasions, Visa and Mastercard were considered extremely overvalued. Indeed, every single time I have clicked on the buy button for V and MA — whether for myself or for one of the real-money, public portfolios I manage such as the IBP or the Dividend Growth 50 — it appeared at the time that the prices were astronomical bordering on insane. So which is it? Undervalued or overvalued? FAST Graphs certainly places both companies in the overvalued category when comparing current “blended P/E ratios” with their historic norms (red-circled areas), although both also have nice growth projections that some would say helps justify their price premiums (yellow highlights). Analyze This! Given all that, it’s notable that the vast majority of analysts are saying: “Full speed ahead!” For example, of the 19 Mastercard analysts surveyed by TipRanks, 17 are calling MA a buy — with an average 12-month target price that offers a 15% upside, and the very lowest projection being about what the stock is priced now. Meanwhile, 19 of 22 analysts in the TipRanks surveys say Visa is a buy — again suggesting that those who invest today will be quite pleased a year from now. Diminutive Dividends Those looking to generate significant income from every position in their portfolios will need to look elsewhere. Although both MA and V have increased their dividends smartly since they began paying them, these have been the IBP’s two lowest-yielding, smallest-income-producing positions … and that won’t change just because we have added to our positions. Due to the economic effect of the COVID-19 pandemic, dividend growth slowed for these companies. The most recent increases — 10% for MA and 6.7% for V — were well below the 20% (and higher) raises they often had dished out. This most recent buy added only about $5 to the Income Builder Portfolio’s projected annual income, bringing it to $2,878. Not surprisingly, I look at the dividends generated by MA and V as a bonus and not the reason to own the stocks. I have selected them for the IBP to improve the portfolio’s quality level and, hopefully, its long-term total return. Wrapping Things Up It is up to each investor to decide if Mastercard and Visa are too rich for their blood right now. These technology leaders have had stretches with price declines — including pretty severe pullbacks during last year’s “coronavirus crash.” Although I own both of these companies in my personal portfolio, and I am very comfortable making relatively small purchases of MA and V for the IBP regardless of valuation, I mostly am presenting them as interesting candidates for further research. I am not making specific buy recommendations. After all, every investor has his or her own ideas about “timeliness” and suitability for a portfolio. FOLLOW US: ► Website: http://www.dividendsandincome.com/ ► YouTube: http://bit.ly/dai_youtube ► Patreon: http://bit.ly/dai_patreon #DividendsAndIncome #DividendGrowthPortfolio #DividendGrowthInvesting $V $MA LEGAL DISCLAIMER: Please consult with a licensed investment professional before investing any of your money. Never invest in a security or idea featured on this channel unless you can afford to lose your entire investment. If your money is not FDIC insured, it may decline in value. Dave is not a licensed financial advisor, tax professional, or stockbroker and he does not purport to be. Links above may include affiliate commissions paid to the owners of Dividends and Income and help support this channel.