Want to Get Rich? Buy This Dividend Growth Stock on the Dip and Never Sell It

There are two major schools of thought when it comes to investing. In one, investors focus on growth and buy companies that they hope will be much larger in five, ten, or twenty years. In the other school, investors seek yield and buy dividend-paying stocks to generate passive income and reliable cash flow for their portfolios. Of course, it’s not just about those two considerations when buying stocks, but growth and yield are two of the main factors.

Dividend growth investing combines the best of both worlds. Dividend growth stocks are those that not only pay regular cash payments to investors, but Also have a growing business that can fuel dividend growth over the long term. The perfect dividend growth stock might be Visa (NYSE: V)the global payments giant.

Today, you can buy Visa stock at a 10% discount to its all-time highs earlier this year. Here’s why it might be time to buy Visa stock on the dip.

Visa: a levy rate on global spending

Visa is a company that most of you are familiar with. It is the world’s largest network for credit cards, debit cards and payments, with 4.5 billion credit/debit cards in service last quarter. That’s up from 4.2 billion in the same quarter last year. Much of the world’s consumer spending is through the Visa network, from the United States to Europe to emerging markets in Asia and Africa.

The business model works a little differently than you might imagine. While Visa is the brand name on many cards, it is not actually a bank or credit issuer. Banking partners such as Bank of America Or JPMorgan Chase It is the banks that take the credit risk. Visa makes money by taking a cut of every transaction made on its network, which it then distributes and shares with its banking partners.

Visa’s business is actually a kind of lever for global economic growth. First, as global consumer spending increases, Visa’s payment volume increases. Second, Visa benefits from the global shift from cash to cashless digital transactions. These are two tailwinds that have existed for decades and are likely to persist for decades to come.

Steady growth, protection against inflation

If you look at Visa’s financials over time, you see that revenue continues to grow and shift to the right. Outside of the pandemic, when global spending came to a halt, Visa’s trailing-year revenue has grown at a solid pace over the last 10 years. Ten years ago, revenue was just over $12 billion. Over the last 12 months, it’s $35 billion. I expect this steady growth to continue over the next 10 years as well.

The operating result is even better. Visa has minimal variable costs on its network, which means it realizes high incremental profit margins when revenues grow. This leads to an expansion of the net profit margin. The operating margin is now 67%, which underscores how incredible Visa’s business model is. This margin is expected to increase slightly over the next 10 years with incremental margins well over 90% on new payment volume streams.

Don’t forget inflation…