Western Union (WU) has a long history tracing back to 1851 and its dominance as a telegraph company. Today, the firm is known for money transfer services. It is also a high-yield stock that could suit investors seeking income with reasonable dividend safety.
The company is the world leader in domestic and international money transfers. It has a network of 550,000+ agents globally operating at retail locations. Additionally, the firm has a growing digital money transfer business through its online app.
Total revenue was $4,475 million in 2022 and $4,388 million in the last twelve months.
According to TIKR*, the stock price has gained (-14.5%) year-to-date and (-26.5%) in the past year. For perspective, the S&P 500 Index is up +14.3% YTD and +2.0% in the past twelve months.
Western Union is basically an income stock. The firm is experiencing challenges growing the top and bottom lines because of intense competition and closing its business in Russia and Belarus. As a result, the company stopped increasing the dividend in 2022.
However, the firm remains solidly profitable, allowing it to pay dividends. As seen by the chart from Portfolio Insight*, Western Union offers a dividend of around 8%. The payout ratio is acceptable at 56%, and free cash flow (FCF) covers the common dividend. Moreover, the leverage ratio is only 1.2X. But the risk exists for a future dividend cut if revenue and earnings per share decline don't stabilize and reverse.
Source: Portfolio Insight*
The equity is undervalued based on the historical price-to-earnings (P/E) ratio. It trades at a forward multiple of ~6.9X, below the 5-year and 10-year ranges. The stock is suitable for those seeking income, but investors should be aware of the company's challenges.
Source: Portfolio Insight*
Disclosure: None
Disclaimer: The author is not a licensed or registered investment adviser or broker/dealer. He is not providing you with individual investment advice. Please consult with a licensed investment professional before you invest your money.