Western Union continues with double-digit dividend yield

The global leader in consumer money transfers is navigating the second dramatic imperative for reinvention in its history.

This is not a first for Western Union, originally a telegraph company, which began repositioning itself some forty years ago - at the start of a major secular trend - toward remittances sent by migrants to their home countries.

Once an essential player, the competitive position of the brand with the black and yellow logo, which claims to be twice the size of its nearest rival, has been severely eroded by the shift to all-digital and the plethora of international payment solutions that have recently entered the market.

As a result, its business is melting away, with revenue declining from 5.4 billion dollars in 2016 to an estimated 4 billion dollars in 2025, while operating profit has dropped from 1.1 billion dollars to 768 million dollars over the past decade.

Like many companies in structural decline, but which are still highly profitable, Western Union has chosen to "cannibalize" itself by aggressively pursuing share buybacks, thereby reducing its outstanding share count by a third in ten years.

In parallel, net debt has stabilized below the 2 billion dollar mark. While they remain manageable in principle, solvency ratios have significantly deteriorated over the past two years, due to the rise in interest rates.

Alongside the diversification of its services, the group's strategy remains focused on returning all profits to shareholders. Over the last three years, Western Union generated an aggregate profit of 2 billion dollars, allowing it to return 1.7 billion dollars to its shareholders, including 1 billion dollars in dividends and 700 million dollars in share buybacks.

At a share price of $9, this earnings capacity must be weighed against a market capitalization of 2.8 billion dollars, an enterprise value - including net debt - of 4.7 billion dollars, and a dividend yield exceeding 10%, reflecting investor skepticism regarding the group's ability to reinvent itself.

Nevertheless, the company is setting aggressive targets. By 2028, it intends to increase the share of services - such as bill payments, credit, or foreign exchange - to half of its consolidated revenue, up from 40% today, and thus return to growth to reach 5 billion dollars in revenue by that horizon.