It might not seem that a massive fintech company like Mastercard (MA -0.85%) has much more room to grow, but don't be so sure. In this Fool Live clip, recorded on Oct. 25, Fool.com contributor Jon Quast discusses Mastercard's business and growth potential with colleagues Matt Frankel and Jason Hall.
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Jon Quast: One of the great things about Mastercard, I don't really think it needs all that much introduction here. This is your global payments network, your digital payments, and as e-commerce really has risen, as cash has gone, digital, companies like Mastercard have seen incredible revenue growth opportunities. It's still an ongoing story, but certainly the last 10 years were really something to be hold. One of the things that I like about Mastercard over, perhaps, some other players in the space is the fact that its international revenue is so big, and it it's so recognized around the world.
Here's what it brings out in its most recent quarterly report. This is worldwide gross dollar volume, this isn't revenue for the company. This is how much money is flowing through its pipes. As you can see here, an outsized portion of its volume comes from international markets, nearly double or over double what it is in the United States. When you think about where the world is going in terms of where is cash going digital? It's in international markets, it's in Asia, it's in Africa, it's in South America, where Mastercard enjoys nearly unrivaled brand recognition.
It's powering so much of this cashless revolution around the world. A very stable business generates a cut and its dividend yield is not great, way less than 1%, but again, this is one of those dividend growth opportunities. It's doubled over the last five-years, still paying out a very small amount of its earnings as a dividend. A lot of opportunity to keep growing that into the future. Another thing that I really think is interesting about Mastercard, really all of these companies, when you think about it, it's one of the better hedges against inflation and I might be speaking out of my realm here, but when you think about the cost of things going up, if you're still paying for those things through a network like Mastercard, that is more volume that is going through the pipes and their cut of that continues to grow the revenues.
That's just my thoughts there on why I like Mastercard going forward, I think it's well-positioned globally and I think that it is just set to continue growing that dollar volume overtime.
Jason Hall: Matt, I know one of the things that you and I both agree on with MasterCard that's really interesting is if you think about the payments processing business does basically merchant processing, it's actually a fraction of the size of the business and the direct payments opportunity that's out there and that as big as this company is, it's opportunity to continue to grow in these other spaces is enormous. I think it's done a better job of innovating and focusing on getting into those spaces than say, like a Visa (V 3.00%) has.
Matt Frankel: For sure. Jon mentioned that they're paying out a very small portion of their earnings as dividends right now. It's because they see those kind of growth opportunities. They see the opportunity to reinvest in the business and really super charge it's growth. Over time, say over the next 20 years, as they capitalize on those growth opportunities and they start to dwindle a little bit, that's where you're going to see them start paying out more and more of their earnings as dividends, and you're going to see real dividend growth happen. But they're making it clear that they are prioritizing dividend. It's just right now they see a better use for their cash flow, which you can't really argue against.
Quast: Yeah, exactly. This is still a top-line growth story primarily and a shareholder return opportunity second.