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Of the companies I follow, few do better at capital allocation than Mastercard Inc (NYSE:MA), which consistently directs money to grow its business organically, make smart tuck-in acquisitions to grow its services revenue stream, raise its dividend, and repurchase shares.

In 2012, Mastercard’s services revenue was little more than some rudimentary fraud tools and managed card benefit services. By 2018, services accounted for approximately 26% of Mastercard’s total net revenue, even as its core payments business continued to grow. In its 2020 first quarter, other revenues, where its services are accounted for, grew to $1.06 billion, a 26% increase year-over-year. This growth would not have been possible without several smart acquisitions along the way that bolstered the capabilities Mastercard could offer its clients.

But Mastercard isn’t just funding growth without returning money to shareholders. Management is also committed to raising its dividend (which has more than doubled in the past five years) and buying back shares, consistently whittling down the number of its shares outstanding. By looking for smart growth opportunities first and then returning excess cash to shareholders, Mastercard gets my vote as a smart capital allocator.

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