McDonald’s Stock: Past Five Years of Dividends

After I recently profiled IBM to examine one of the worst scenarios with a dividend growth investing strategy over the past five years, I thought I would take a look at another company that has fallen out of favor during the same period despite showing many of the characteristics of an excellent investment back in 2011. I’m talking, of course, about fast-food giant McDonald’s Corporation (MCD).

Back in 2011, the stock was on a roll. It had delivered 18% annual returns in the previous decade, 14.5% earnings growth, 17.5% dividend growth, was paying out a 3% dividend, was earning $5 billion in profits, only half were paying paid out as dividends, only had $12 billion in debt, and was sporting insane net margins in the 20% because of the lucrative contract arrangements with its franchisor-franchisee business model in which 83% of locations are independently owned and operated.

McDonald’s stock was … Read the rest of this article!

Learning From the Nikkei Index’s All-Time High

On December 29, 1989, the Nikkei Index in Japan hit an all-time high of 38,957. Today, over three decades later, the index trades at 29,174. That is a 1% annual decline for a thirty-year period for a total loss of 25% on a nominal basis. If we took into account the prevailing rate of Japan’s inflation, the index would need to be at 61,880 today just to break even such that the actual purchasing power loss has been 53%. 

It has been a totally astounding long-term bout of underperformance. If someone in Japan had to make any type of lump-sum investment in December 1989 to provide for a lifetime of support, the results would have been disastrous as even a withdrawal rate as low as 4.5% would have meant that the money was extinguished within 11 years. 

The good news, I suppose, is that most investors do not make singular … Read the rest of this article!