This Dow Jones Dividend Growth Stock Just Hit an All-Time High. Here's Why It's Still Worth Buying in February.

Long-term investing focuses on finding strong companies with great potential for future earnings growth while paying a fair price for their shares.

Visa (NYSE: V), a well-respected company in the Dow Jones Industrial Average (DJI), is a leader in the payment processing industry. It has ample growth opportunities, a rising dividend, and a reasonable valuation.

Recently, Visa's stock reached a new all-time high following its impressive first-quarter 2025 earnings announcement. Buying stocks at record highs might feel strange, especially since most of us prefer discounted prices for products. However, investing is different. A high stock price doesn't necessarily mean the stock isn't a good buy if the company's performance is outstanding, and Visa is arguably among the best in its field.

Here’s why Visa could be a smart purchase right now.

Consistent Performance

Visa's results for the first quarter of 2025 were strong. Payment volumes rose by 9% compared to last year, processed transactions climbed by 11%, revenue grew by 10%, and earnings per share increased by 14%.

Visa’s international segment performed particularly well, with payments volume growing by 11% in constant currency, compared to 7% growth in the U.S.

Expanding into international markets enhances Visa's network effects. This means the more people use Visa cards, the more merchants are willing to accept them, creating a stronger global network.

A Reliable Performer Through Economic Cycles

Visa's business model is less affected by economic downturns than many financial firms. The company earns fees every time a Visa card is used, whether in person or online. While Visa benefits from higher consumer spending during good economic times, the broader trend of increasing card usage by consumers and businesses supports its growth in the long term.

Unlike major competitors like American Express (NYSE: AXP), which utilizes a closed-loop network that issues its own cards, Visa operates an open-loop payment network. This structure allows Visa to delegate credit risk to partnered banks, thereby facilitating easier growth.

Visa’s approach leads to significant operating margins. For instance, Visa recorded $9.51 billion in revenue against $3.28 billion in operating expenses, resulting in a remarkable operating margin of 65.6%. This indicates that the company turns nearly two-thirds of its sales into operating income, showcasing its robust business framework.

A Substantial Capital Return Program

Visa consistently generates healthy business growth, allowing it to return considerable cash to shareholders. In fact, the company allocated $3.9 billion for stock buybacks and $1.2 billion for dividends.

While Visa offers a dividend yield of just 0.7%, it's crucial to note that shareholders receive much more in total returns. If Visa solely focused on dividends instead of buybacks, the yield could reach approximately 3.1%.

Visa's Valuation

Ongoing buybacks have kept Visa’s valuation balanced as earnings-per-share growth has outpaced net income growth. Although Visa has provided excellent returns for long-term investors, its current valuation still represents a fair opportunity.

Even though Visa's price-to-earnings (P/E) ratio is above historical averages, its forward P/E suggests growth potential. According to analysts, Visa should be able to match its valuation within a year, provided earnings hit expectations and stock prices stabilize. However, if stock values continue to rise, its valuation may become stretched.

A Justified Optimism for Investors

Warren Buffett once said, "You pay a very high price in the stock market for a cheery consensus." This means if a stock is highly regarded, it may carry a hefty price tag.

Visa is currently viewed positively, leading to its potentially high price in the short term. Yet, the prospects for steady growth over the long term are promising.

Rather than trying to time market fluctuations to purchase Visa at a lower price, investors may find it more beneficial to buy shares now, focusing on the company's enduring growth, instead of waiting for a price drop.

investing, growth, dividends