Jason Moser (3:04)

Matt we both read over the weekend about how Amazon and Walmart are looking at ways to possibly issue their own stablecoins, which in turn could, and I want to stress, could have an impact on payments companies like Visa and MasterCard essentially by taking volume away from their massive networks. And now I want to dig into this by asking first and foremost, like how exactly would this work? Like as a consumer, I mean, I'm hoping this isn't the case. Are they going to force me to use stablecoins to make my purchases?

Matt Arger Singer (3:35)

Oh no, not at all. I mean, I think if you're a consumer who wants to do more transactions within the world of crypto, outside of the banking establishment, this gives you another option. And I think this is especially appealing to someone who might live outside the U.S. or is doing cross border transactions who might live in a country with a more volatile currency. It becomes a nice benefit, you know, it's a peg to the relative stability of the dollar without actually having to be in dollars. But if you're someone like me who has no problem with the banking establishment and generally likes to use credit cards for like 99% of transactions, this won't affect you. Now I think for Amazon or Walmart it's a smart move. These are two of the biggest retailers on the planet. Obviously not only does this potentially attract millions of new users who only want to transact in crypto, it could potentially also save billions of dollars, I mean, billions in processing fees that these retailers would otherwise pay to Visa, MasterCard, American Express and banks to facilitate transactions. So I don't think anyone should be surprised that Amazon and Walmart are getting into this.

Jason Moser (4:36)

Yeah, I'm glad you made that cross border point because that to me seems one of the most obvious use cases. And these are global businesses, obviously. So that that's something that could certainly benefit now hinges very much on the regulatory environment, which seems clear as mud right now. So it does seem like we really need to see more in the way of consumer protections, some type of regulatory framework if stablecoins are going to become a meaningful medium of exchange. And to be clear, I think that's happening, right? It's something that's going to take some time, but I mean when you look at it, tens of millions of people globally use stablecoins as a medium of exchange today. My suspicion is that probably grows over time. And it's worth noting Too, Visa and MasterCard are already partnering with crypto platforms to offer cards that allow you to spend against your stablecoin balance. So it's not like Visa and mastercard are ignoring the stablecoin opportunity. They're absolutely participating in it. And I think investors should be encouraged by that. But if you look at Visa and mastercard over the last five years, the stocks have basically more or less they've matched the market stretch that over 10 years, they've outperformed vastly. And so the longer you own these stocks, it seems like the more sense it makes. But let's look out over the next five years, particularly in this sort of evolving space. How do you think these companies fare given all of these changes?

Matt Arger Singer (6:01)

Right, so the next five years, it's tough to say. But do stablecoins mean that these companies are disrupted and are going to do terribly over the next five years? I think that's an easy call. I don't think so. They're so dominant. Each operates in more than 200 companies. Billions of issued cards outstanding, millions of merchants around the world that use them. I mean, you, you mentioned tens of millions of people using stablecoins, which is growing fast, but that's a drop in the bucket compared to Visa and MasterCard's network. Right. And keep in mind, consumers get a lot of benefits from using cards, especially credit cards. First, they're, they're generally free to use. They give me rewards like cash back or airline miles or other benefits. And other than a stable currency, I'm not exactly clear what consumers get from using stablecoins. I know circle and tether get to earn interest on the float, but do consumers get anything out of it? I don't think so. Look at the same time, though, I'm the last person who says big dominant companies can't be disrupted. But over the next five years, I don't see it happening with Visa, MasterCard. In fact, as you mentioned, with both companies, they can actually become big players in the crypto space themselves. So I'd rest fairly easy if I'm a shareholder. And guess what? I am. Jason.

Jason Moser (7:12)

Yeah, I think you're right. It boils down to incentives. You got to give me a reason to want to change over. And like you, I'm, I'm perfectly happy with my current banking relationship and how it enables us to spend our money and track our spending. So it'll be, it'll be fascinating to see exactly what these companies do. Next up, Amazon and Roku get a little closer and we've got some dividend stocks you may want to keep your eye on.

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Jason Moser (8:05)

Matty Roku and Amazon are teaming up, or rather they're extending or expanding their relationship. This partnership will allow advertisers to reach roughly 80 million connected TV households through Amazon's demand side platform. This seems like a space where we're seeing more partnerships in order to take advantage of this massive opportunity. The ad supported video on demand space. Right. That a VOD space. And to be clear, like I said, Roku has already been working with Amazon's DSP to a certain degree. Right. That demand side platform. But this expanded partnership goes deeper where programmatic in stream video inventory is concerned. So what do you, what do you make of this news today?

Matt Arger Singer (8:49)

Well, at first read, this definitely feels like a win for both companies. Obviously, given Amazon size and other revenue sources, it's going to move the needle much more for Roku. But you've got this massive network of advertising touchpoints with Amazon's dsp. Now you fully integrate that with Roku, which I think accounts for something like half or almost half of all TV streaming.

Jason Moser (9:11)

Yeah, that has that.

Matt Arger Singer (9:12)

That's impressive. So if you're an advertiser, you now have much greater scale, but also you can now be much more targeted because you're not having to potentially advertise to two audiences that already have significant overlap. So I think it's a nice win for both companies for sure.

Jason Moser (9:26)

Yeah. You remember it wasn't all that long ago we weren't even talking about Amazon as an advertising business. Right. I mean, it was just a little rounding error on the income statement. Maybe they made like, you know, several million dollars. And now all of a sudden, I mean, they're operating on basically like an $80 billion annual run rate with their advertising business. It's just phenomenal to see clearly they've built out, I think, ways to win on both sides. Right. Whether it's that demand side platform or just through the content that they're slinging us through their many, many channels. So this seems to make a lot of sense. Now I think a logical question, or at least the question that came to me initially, is how this may or may not affect the Trade Desk. And obviously a lot of our listeners are very familiar with the Trade Desk very popular recommendation in the foolish universe. And I think it's worth noting Trade Desk shares are up today. So I don't think this was something that the market received negatively. And in fact, Trade Desk and Roku announced their own partnership toward the end of last year. So we're seeing a lot more collaboration in this space. So it prompted the question to me, like, is this a rising tide ultimately that lifts all boats situation? And I kind of feel like that's the most likely answer. I mean, when you look at the opportunity here in the, in the advertising video demand space, the revenue in AVOD worldwide is expected to reach better than $54 billion this year. It's projected to hit $71.3 billion by 2029. It's growing. And I think part of that has to do with the value proposition, particularly in emerging economies or economies that maybe are not, not quite as well off as ours. It's just consumers get tremendous value and I think we're seeing more and more consumers even hear domestically gaming getting that value a lot. Netflix bringing advertising into their model as well. So it seems like an exciting space. Now with that said, you know, Roku shares have had a tough go over the last five years, Matty. It's, it's a big opportunity, like I noted, but it's a very competitive space. So is this a sign that Roku is getting things back on track? Do you see this from these levels today as potentially a market beater over the next five years?

Matt Arger Singer (11:37)

Let's say so here's my problem with Roku, Jason, and it's very superficial. I am not sure who has actually made money investing in Roku, and I don't want that to sound flippant, even though it is. But unless you bought Roku within its first few months of going public in 2017, you've not only drastically underperformed the S&P 500, but you've lost money. The stock did soar in 2020 and 2021, but if you aren't lucky enough or savvy enough to sell during that time, you're down big from those highs. So I'm not commenting on the business and I think this partnership, this expanded partnership with Amazon is definitely a good step. But is the company a good bet in the long run based on its track record? As a public company and that actually means something to me. Doesn't appear to be a good bet to me. Jason?

Jason Moser (12:25)

Yeah, I am an Amazon shareholder. I am a trade desk shareholder. I don't own Roku, never have and I don't think I ever will. And part of my hang up with the business, you know, following it since it went public, it's had to pivot a lot. Right. Going from a hardware to software and now you know, trying to produce their own content, going into advertising, all these different things, it's, it's just kind of tricky to see exactly where their primary focus is. And, and so I think, you know, I'm, I'm happy being a shareholder in Amazon, in the trade desk and I'll just keep moving forward. Matty, let's wrap it up. We'll talk some dividend stocks. We all like cash in the pocket and you run two of our diff dividend different dividend services here that, that focus on, on dividends and income. So I wanted to start firstly with your take on the metrics. What are one or two key metrics you think investors should prioritize when looking at dividend stocks?

Matt Arger Singer (13:20)

Yeah, there are many I would say if you're just starting to look at dividend stocks, I think looking at how a company has grown its dividend, the growth rate of the dividend over time and has that growth exceeded inflation on an annual basis. I think that is a tell that the company's growing its earnings. It's becoming a more profitable, valuable company and it's showing up in their dividend. So it's a good proxy for a company's growth. And then related to that, check out the payout ratio. Right. We all get enticed by companies that have high yields, 6, 7% yields. Generally those companies are paying out a high proportion of their earnings out as dividends and that can be unsustainable especially if the company's earnings slow down or if it's a cyclical business. With dividend paying companies I generally like to see a payout ratio below 70%, even below 60% to be safe. So those would be the two I would, I'd focus on initially and occasionally.

Jason Moser (14:11)

You'Ll see that payout ratio fluctuate. It could be due to one time expenses or whatever the it may be. So I guess, I guess it makes more sense to really look for it over time, right?

Matt Arger Singer (14:21)

Yeah, look maybe look at like a five year trend and that give you enough information probably.

Jason Moser (14:26)

Well we've been talking about it all show I know You've got some favorites in the space. Mattie, do you care to share if you have a couple of dividend stocks that you feel like are worth getting on listeners radar today?

Matt Arger Singer (14:39)

Absolutely. I've always got some favorites. So I'd say there are two that stand out to me right now and both are fortunately or unfortunately tied to the housing market. So just keep that in mind. I think both these can be winning investments from here, but they would do a lot better, Jason, over the next several years if there was a pickup in US Home transactions. So with that aside, the first stock is Owens Corning. The ticker is oc. We just re recommended this in our dividend investor service here at the Fool. It's a leader in roofing and insulation. If you've ever been to Home Depot, Jason, looking for insulation for your roof or some other part of your house, you've probably seen the big pink bags with the Pink Panther images on them. That's Owen's Corning really well managed business. The dividend yield is only 2% right now, but it's been growing at double digit rates. Management has also been buying back a lot of stock. In fact, management is targeting 1 billion in combined dividends and buybacks each of the next two years. So it works out really nicely for shareholders if you're looking at shareholder yielding companies. My second idea is Whirlpool Ticker whr I think everyone should know Whirlpool. It's North America's leading, you know, kitchen bathroom appliance maker. You got brands like Whirlpool, of course, but MayTag, KitchenAid and Sinkerator are all Whirlpool brands. It was my stock on the radar last Friday during our Friday show. Whirlpool stock has really suffered over the last several years. It's had rising competition from Asia. As I mentioned, the housing market here in the US has been stagnant. But Whirlpool got some really nice news last week. It looks like the 50% steel tariffs that will be that are being applied to various importers are also going to be applied to appliances. So that's going to give Whirlpool, which manufactures the vast majority of its products in the US a major leg up. Stock is very cheap, trades for less than 10 times forward earnings and has a dividend yield of almost 8%. It's a little bit riskier than Owens Corning, but I like the value and I like the turnaround potential.

Jason Moser (16:30)

All right, I'm going to have to I got to ask you one last question. You know it's coming.

Matt Arger Singer (16:35)

Yeah.

Jason Moser (16:35)

You're looking at these two, right? Owens Corning, Whirlpool. Do you have a favorite? Is there one you like over the other, or do these really just represent a nice sort of way to get a good sort of risk exposure? 11 you said, obviously, Whirlpool a little bit riskier. Owens Corning, maybe a little bit lower on the risk scale. Is it a nice one two punch in that regard?

Matt Arger Singer (16:57)

It's definitely a nice one two punch. I own both. If I had to pick one for the short run, I might go with Whirlpool. If I had to. Oh, one for the next five plus years, I would probably go to Owens Corning. I just think its business is less cyclical. It's much more tied to refurbishment and replacement as opposed to Whirlpool, which of course needs people to be buying new appliances. So I might go with Owens Corning in the long run, even though I like both.

Jason Moser (17:21)

We'll leave it there. Addie, thanks again for being here.

Matt Arger Singer (17:23)

Thank you, Jamo, as always.

Jason Moser (17:25)

People on the program may have interest in the stocks they talk about, and the Motley Pool may have formal recommendations for or against. Again, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley fool editorial standards and are not approved by advertisers. Advertisements or sponsored content are provided for informational purposes only. To see our full advertising disclosure, please check out our Show Notes. I'm Jason Moser. Thanks for listening. We'll see you tomorrow.