Charge! Earnings due for Dow’s best performer

Tom Hudson hosts “The Sunshine Economy” on WLRN-FM in Miami.
Tom Hudson hosts “The Sunshine Economy” on WLRN-FM in Miami.

When Americans reach for their wallet, it’s not cash they’re pulling out. It’s plastic. And that has meant solid growth for Visa.

The stock is the best performing member of the Dow Jones Industrial Average this year, rallying 23 percent. That’s twice as much as high profile, high tech members like Apple and Intel. Visa may not get the headlines, but it certainly has gotten the attention of investors. Shares are near all-time highs. (So are those of its chief competitor, Mastercard, which has done even better for its shareholders this year. However, Mastercard doesn’t have the stage membership in the Dow affords Visa.)

Both companies are scheduled to report their latest quarterly results in the week ahead; Visa on Wednesday and Mastercard on Thursday.

These credit card companies aren’t about credit. Oh sure, their businesses rely on consumer access to credit, but these companies are electronic payment giants. They make money on processing the money, and the data our spending provides. Every swipe or dip of their credit and debit cards leads to revenue.

Retail sales were strong in the second quarter. E-commerce retail sales continue growing by double digits. And gasoline prices jumped. That’s an important category considering the fees charged by Visa and Mastercard are a percent of the sale. So higher pump prices translates into more revenue. And when was the last time you paid for gas in cash?

Long-term investors have been richly rewarded. Given the price action in these stocks, the market expects the rewards to continue.

Tom Hudson hosts “The Sunshine Economy” on WLRN-FM; @HudsonsView.