Joel Greenblatt Dividend Stocks In Focus: Western Union

Taking a look inside the portfolios of the world’s most well-known investors can be a valuable way to find investment ideas.

For example, Joel Greenblatt is the Managing Principal and Co-Chief Investment Officer of Gotham Asset Management, which manages approximately $15 billion in stock investments.

Gotham Asset Management offers several mutual funds that take both long and short positions in stocks.

On the long side, Joel Greenblatt owns many high-yield dividend stocks.

Among the top 20 dividend stocks in Joel Greenblatt’s portfolio is Western Union (WU).

Western Union is not on the list of Dividend Achievers, because the company held its dividend steady in 2014.

The Dividend Achievers are a group of 271 stocks with 10+ years of consecutive dividend increases.

However, Western Union recently increased its dividend, has a solid 3.5% dividend yield, and the stock is very cheap.

This article will discuss why Western Union could be an attractive stock for dividend investors.

Business Overview

Western Union operates in global payments. Its services allow customers to send and receive money around the world.

Western Union has a globally diversified network.

(Click on image to enlarge)

WU Network

Source: 2016 Investor Day Presentation, page 5

It collects fees from these services to generate revenue. The company operates three business segments:

  • Transaction Fees (70% of revenue)
  • Foreign Exchange (27% of revenue)
  • Other (3% of revenue)

Approximately 80% of Western Union’s revenue comes from consumer-to-consumer services.

On the surface, Western Union’s financial performance last year looks terrible. Earnings-per-share declined 69% in 2016.

However, the company incurred $601 million of charges last year to settle investigations by the U.S. federal government and state government agencies.

The investigations focused on improper conduct by certain Western Union agents, and a lack of oversight when it came to anti-laundering and anti-fraud controls.

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