The pandemic-driven transition from cash to digital payments has brought about a significant change in the financial services industry, and this change is here to stay. The global financial sector is going through a shift as people move from cash to online payments, increased card usage, and mobile banking. This not only adds convenience to our lives but has also brought about higher security and ease of use. With financial companies offering all services under one roof, consumers now do not need to look for multiple applications to get the job done. There are several financial services stocks worth adding to your portfolio, and I’ve picked the top three stocks suitable for the long term. These are well-established companies with a global presence and some even pay a dividend. Let’s take a look at them.
American Express (AXP)
Up 25% year-to-date and 41% in the past 12 months, American Express (NYSE:AXP) stock is on a rally. Trading at $236 today, the stock has had an excellent start to 2024. It reported an impressive first quarter with an 11% year-over-year jump in revenue and a 34% YOY jump in net income. The management expects the full-year revenue to grow between 9% to 11%. It already has over 140 million cards in force on the global network.
One solid reason to hold the stock for the long term is its user demographic. American Express saw 60% of new customer accounts from Gen Z and Millennials and this means it can attract a younger consumer base.
As young people start making and managing their money, they will be on the lookout for cards and fintech companies that make money management easier, and American Express has shown its strength in this segment. The company recently announced a 17% hike in dividend and enjoys a yield of 1.18%. Even during the pandemic, the company put a pause on the dividend increases but has never put the dividend on hold, showing its commitment to rewarding shareholders.
As more people use cards, American Express will continue to benefit. American Express looks like a very attractive long-term investment and one that will continue rewarding you over the years.
PayPal (PYPL)
Financial services provider PayPal (NASDAQ:PYPL) is up 3% year-to-date and exchanging hands for $63. The stock is significantly down from the all-time high of $298 it hit in 2021. Despite the stock remaining flat since the beginning of the year, this is the one for the long term. Firstly, do not expect an immediate turnaround by the company. You will have to remain patient if you want to reap returns.
PayPal reported revenue growth of 9% in the first-quarter results, and investors weren’t happy because they’re used to higher growth percentages. The company is taking the necessary steps to cut costs and generate higher revenue.
It is an industry leader with a 45% market share in online payment processing services. Despite the competition, PayPal’s core business remains robust. It has seen positive active user growth and an improvement in monetization per user.
Another catalyst that could work for the business is the advertising platform. Several companies have seen a revenue surge due to advertising, and PayPal is taking its chance here.
The company announced it will launch its advertising network, and with 427 million active users, this could be a smart move. This platform will rely on the transaction data generated by the active accounts. The new ad business can make a lot of difference to the company’s profits and could take the stock higher.
PayPal is a long-term buy-and-hold, and the stock is looking very cheap right now.
Visa (V)
My favorite fintech stock, Visa (NYSE:V) is exchanging hands for $270. It is up 4% YTD and 19% in the past 12 months. The company has cracked the code of a successful business and makes money every time a Visa card is swiped. This allows it to keep the operating costs at a minimum while ensuring steady revenue.
Visa reported impressive financials even during high inflation and it generates enough free cash flow to keep rewarding shareholders. Visa enjoys a dividend yield of 0.77% and has increased the dividends annually for 16 consecutive years.
It caters to over 100 million merchants and has tremendous upside potential. Over 60% of the credit cards across the U.S. are Visa and as we continue to walk towards a cashless economy, this number is only going to expand. More people have a Visa credit card as compared to any other card globally. In the second quarter, Visa reported a revenue of $8.8 billion, up 10% YOY and a 16% jump in cross-border transaction volume. Its services revenue also saw a 7% jump to hit $4 billion.
While Visa is not the cheapest stock out there, it is one stock with significant upside potential. The company’s global operations and increasing market share make it one of the best financial services stocks to own. It is a dividend powerhouse that can keep rewarding you for many years.
On the date of publication, Vandita Jadeja did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.