Ignored Stock Offers a Great Opportunity
These days, a lot of investors are focused on high-growth technology names—anything tied to artificial intelligence (AI), the cloud, and so on. They have every reason to do so. These technology stocks have given a stellar performance over the past few years.
Here’s the thing though: while chasing what’s hot has been great, many investors are ignoring solid companies that generate consistent cash flow and reward shareholders immensely. Income investors shouldn’t make the mistake of overlooking these gems.
Western Union Co (NYSE:WU) is an excellent example of this. It certainly isn’t making any headlines in the world of AI or anything of that sort, but it does offer something that’s rare in today’s market environment: an inflation-crushing dividend that’s supported by stable earnings and a business that still works.
What Does Western Union Do?
Headquartered in Denver, Colorado, Western Union Co offers money movement and payment services globally. The company operates through two business segments: Consumer Money Transfer and Consumer Services.
The Consumer Money Transfer segment provides money transfers for international cross-border and intra-country transfers, primarily through a network of retail agent locations, websites, and mobile devices.
The Consumer Services segments offers services such as bill payments, money orders, retail foreign exchange, prepaid cards, lending partnerships, digital wallets, and a media network. (Source: “Profile,” Yahoo! Finance, last accessed April 15, 2025.)
WU Stock Offers a Reliable Dividend
Let’s start with what income investors care about most: dividends. WU stock currently pays a quarterly dividend of $0.235 per share, which works out to $0.94 annually. That gives it a forward dividend yield of roughly 9.5%.
How significant is this?
It’s well above the yield on the S&P 500 and even what one would get for holding high-yield exchange-traded funds (ETFs).
Moreover, the dividends are safe, at least for now.
In fiscal 2024, Western Union generated adjusted earnings per share of $2.74, putting the payout ratio at around 33%. That’s a healthy payout ratio; it could even be sustainable if the business faces headwinds. (Source: “Western Union Reports Fourth Quarter and Full Year 2024 Results,” Western Union Co, February 4, 2025.)
Also, you should know that the company’s management is committed to rewarding WU stockholders. In 2024, WU stock returned about $496.0 million to shareholders in dividends and share repurchases, breaking down to $318.0 million in dividends and $177.0 million in share repurchases.
Western Union has been consistently paying quarterly dividends since 2010. Over this time, the dividend amount has increased a lot, too. In late 2010, the quarterly dividend payment was just $0.06 per share. Now it’s 291% higher.
Chart Courtesy of StockCharts.com
Big Institutions Backing WU Stock
Another thing going for WU stock? Institutional support.
Top investors, including The Vanguard Group, BlackRock, and T Rowe Price Group, collectively hold over 100 million shares of WU. To say the least, this is a strong vote of confidence.
It’s also worth noting that institutional ownership often acts as a floor under a stock. Big institutions tend to remain invested for the long term; they don’t sell on minor market fluctuations.
In addition to all this, Wall Street analysts have a bullish view on WU stock. At the time of writing, 19 analysts following Western Union had an average price target of $11.93 on the stock. There’s a high price target of $17.00 on WU stock as well. (Source: “Analysis,” Yahoo! Finance, last accessed April 15, 2025.)
The Lowdown on WU Stock
WU stock isn’t really a growth stock. Don’t expect it to post the kinds of returns AI plays have been hitting over the past few years. Instead, see Western Union as a long-term play.
With an over nine-percent dividend yield, a low payout ratio, consistent cash flow, and a rock-bottom valuation, WU stock looks like a compelling opportunity.
Mind you: this is not a new pick for Income Investors. I profiled Western Union back in early March. Since then, the overall stock market has experienced massive gyrations, which has caused some selling in WU stock. The decline in the stock price has made the yield here look even better than before. The five-year average yield on WU stock is around 5.6%, so interested investors would be getting a much better deal now compared to a few weeks ago.