By Ian Salisbury

With a hefty 10% dividend yield, Western Union stock looks inviting. But given that its cash flow and revenue are under assault from changing technology, it's a risky bet for long-term investors.

Founded in 1851 and known for its ubiquitous black-and-yellow logo, Western Union operates more than 360,000 outposts that allow immigrants, travelers, and other customers in more than 200 countries to send money around the world.

On the surface, the dividend payout looks solid. While Western Union's per-share earnings haven't grown in the past few years, they've remained remarkably steady.

Last year, the company delivered adjusted earnings per share of $1.75 -- essentially flat with the previous three years. While Western Union forecast earnings per share of $1.75 to $1.85 for 2026, Wall Street analysts expect $1.75, according to FactSet.

The stock is dirt cheap, trading at just five times forward earnings, down from about 13 a decade ago. The dividend, while high, is well covered. It costs the company about $300 million a year, and Western Union generates around $500 million in free cash flow.

But if the dividend isn't under immediate threat, it's unclear whether Western Union will be able to sustain it in the long run, given the range of headwinds its business faces. The market has punished the stock, which has fallen to about $9.40 today from more than $25 five years ago.

The most immediate threat is President Donald Trump's hard-line immigration policy, which squeezed the number of U.S. workers sending money back to families in places like Mexico, Ecuador, and Guatemala. The crackdown took a big bite out of first-quarter earnings, which the company reported last week, missing Wall Street estimates. Shares fell about 6% on the news, although they quickly recovered. They are up about 0.6% on the year.

Unfortunately, immigration is just one of the company's problems. For decades, Western Union's biggest strength has been its reach -- its network of outposts that allow anyone to send cash from, say, New York or London to remote villages in almost any developing country. The rise of mobile payments, which have seen rapid adoption in many developing nations, is challenging that. New competitors like Wise and Remitly Global have been threatening to steal market share and cut into margins.

Take a step back to look at Western Union's broader financial picture, and you see a different story. Last year, the company reported $4 billion in revenue, down from $5.4 billion a decade ago. Organic revenue, excluding businesses Western Union sold or exited, has declined about $400 million. While the company has managed to hold earnings per share steady in the past few years, thanks in part to stock buybacks, other measures show its profitability steadily eroding. Last year's $500 million in free cash flow was down from more than $970 million in 2016.

To its credit, Western Union isn't standing still. The company has unleashed a slew of initiatives aimed at securing a turnaround. Just this year, it closed acquisitions of digital-payments companies in Singapore and Mexico. It expects to close a $500 million deal for Latin American remittance competitor Intermex in the second quarter. The company has also delved into cryptocurrency, with plans to launch a stable coin, and diversified further into foreign exchange to cater to affluent travelers.

In the long run, Western Union's ubiquitous brands and unmatched global network should give it an edge against newer competitors, Tom Hadley, the company's head of corporate development and investor relations, tells Barron's. "Scale matters a lot," he says.

The problem is, even if Western Union can carve a niche in the world dominated by mobile payments, that's unlikely to be as stable or profitable as its old one of handling cash remittances.

Last quarter, the number of digital transactions handled by Western Union grew 21% but digital revenue grew only 6%, notes Deutsche Bank analyst Nate Svensson.

"They're entering new geographies, but they're not making any money, or a relatively small amount of money," says Svensson, who rates the stock Hold. "In order to compete, you have to come and price super-aggressively or offer discounts or promotions, whatever it happens to be, to drive that transaction growth."

For 2026, Western Union forecasts overall revenue growth of 6% to 9%, including additional revenue from the Intermex acquisition. Revenue at Western Union's legacy business is expected to be flat. Among 21 analysts who cover the stock, there are nine Sells, 11 Holds, and just one Buy, according to FactSet. The average target price is $8.81, about 7% below today's price.

The upshot: Western Union's dividend isn't in imminent danger. But the company has yet to demonstrate that it can grow revenue and profits again. Without those, the dividend can't go on forever. What's more, the share price could erode, meaning that even if investors could count on the 10% dividend yield, their total returns might be much lower.

Write to Ian Salisbury at ian.salisbury@barrons.com

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May 01, 2026 21:30 ET (01:30 GMT)

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