American Express Company (AXP), Mastercard Inc (MA), Visa Inc (V): How Much Longer Will You Carry Cash?

This is the kind of name Buffett likes to hold forever: a 153 year old company that has a reasonable valuation at a forward P/E of 14.65 with a yield of 1.20% at a reasonable payout ratio of 20%. The company has gradually grown its market share of US credit/charge purchase volume from 19.9% in 1999 to 26.4% in 2012.

No, it doesn’t have the stunning operating margin of Visa at only 22.73% and analysts see only 12.08% five year EPS growth. But like most Buffett names it is a solid, steady performer with the stock outperforming the S&P 500, up 30% over the last year. It has consistently been raising its dividend for ten years and buying back stock.

Although American Express Company (NYSE:AXP) is generally more high-end, it’s partnering with Wal-Mart on the Bluebird card, a credit and debit alternative they call it, to appeal to the millions of Americans without credit cards or checking accounts. For many working poor this is a much better alternative to check cashing businesses that take a substantial cut of the paycheck. The company is reporting Q2 earnings on July 17 and analysts will be interested in the success of Bluebird.

Is it really priceless?

Mastercard Inc (NYSE:MA) has achieved an African coup, inking an agreement with Nigeria to have its payment system included in state issued identity cards, 13 million now and soon up to 100 million. If all goes well this gives Mastercard a huge advantage in the continent as this Fellow Fool details. Look for a Nigerian pickpocket press conference soon!

Mastercard trades at a trailing 25.85 P/E with a .40% yield. Aptly headquartered in Purchase, NY, its operating margin is 53.91% with no debt and more fairly valued than Visa with an EV/EBITDA of 15.65 to Visa’s 17.22. It has a larger insider hold at 10.54% to Visa’s .10% but trades at 10.76 price/book, more than twice Visa’s 4.62.

Mastercard Inc (NYSE:MA) has the same overseas opportunities as Visa and now a strong African head start. It hit a 52-week high of $595.03 on July 5. It has also been buying back shares and analysts predict 17.67% five year EPS growth.

Which card to carry?

For value one should buy American Express Company (NYSE:AXP), but for growth, all things being equal, Mastercard is the priceless name with growth close to Visa Inc (NYSE:V) and fairer valuation. Even if you still carry cash, carry one of these cards in your portfolio.

The article How Much Longer Will You Carry Cash? originally appeared on Fool.com and is written by AnnaLisa Kraft.

AnnaLisa Kraft has no position in any stocks mentioned. The Motley Fool recommends American Express, MasterCard, and Visa. The Motley Fool owns shares of MasterCard. AnnaLisa is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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