Toying around with the idea of buying Visa

Really, Visa? As a dividend growth investor my main goal is to create a portfolio containing high quality dividend paying stocks, which hike their dividend yearly, giving me an ever growing passive income stream of dividends to, finally, live off.

The portfolio's of fellow dividend growth investors are typically stuffed with stocks like Coca-Cola, Procter & Gamble, Exxon, Chevron, Johnson & Johnson, General Mills, Wal-Mart Stores, McDonald's and Philip Morris. Notice how Visa is not on that list.

Visa is one of the largest payment processors in the world. Visa makes its money of service fees, data processing fees and international transactions fees. They do not give credit! So they do not carry the default risk of their cardholders. They just put the payment network in place and rake in the fees. Simple to understand.

Why I like Visa? Well, they got several things going for them that makes me like them. First off, they raised their dividend for the last five fiscal years. I believe management will maintain this habit. It could very possibly become a Dividend Contender, or even a Dividend Champion, meaning they'd raise their distributions for 25 years consecutively.

I like their economic moat, it's very hard for new players to put those payment networks in place, the biggest competitors are MasterCard (I have a position in them, bought in February this year) and American Express.

I like the company's financials. They have no debt, and 3 billion in cash. Crazy profitably, high margins and good growth perspectives. More and more people over the world start paying with credit/debit cards instead of cash, which is obviously great for Visa. The more gross dollars are processed by Visa, the more income they get, which means their income is naturally adjusted for inflation! Great inflation hedge there.

If you look at the a stock screener, you get a wrong impression of Visa's valuation. Visa shows a lofty valuation of 77x times earnings. Don't be fooled by this number. It doesn't account for one-time events that inflate the P/E. The "real" EPS of visa is somewhere in the neighbourhood of $7.30. That means right now the stock trades at 23.4x earnings. Still not cheap. It tells a much different story that the 77x times earnings though!

Analyst consensus predicts an earnings growth just shy of 20% through 2017, that makes the current valuations even more acceptable if Visa could pull that off. Given that Visa grew its earnings in the Great Recession, I think they'll be able to do it.

To summarize: 
I really think this investment could be good for me in the next decade. I like Visa's track record over the last five years, I like the debt free balance sheet, I like the growth prospect's, I like the "no-credit-risk" aspect of their business, I like their possibility to expand in emerging markets, I like the inflation hedge in the business model, I like the well protected moat.
Things I don't really like, the stock isn't particularly cheap, although not vastly overvalued in my opinion. If the current valuation was below 20x earnings, I'd be all over that stock. That would mean the stock would have to pull back to around $140-$145, or about 15% of today's levels.
The dividend yield is a tad on the low side (0.78% as we speak), although, that's not really a compelling reason for me to not invest in a company. I invested in MasterCard, they give a dividend payment south of 0.50%.

I like the business, I will be an owner of this business in the future, but is now a good time to buy the stock? What do you think, do you like Visa?

Thanks for reading, take care.