Let’s put it this way, while the US stock market is on a super bullish ride, McDonald’s has struggled with a flat return for the past two years. In fact, it’s a blessing the stock pays dividends because otherwise it would have been better to put your money in a money market fund if you only look at the stock appreciation since September 2012!



    What is Happening with Mickey D?

    The optimist will tell you that:

    MCD is the leader in the fast food industry,

    It dominates with its incredible locations and their Real Estate is key in their business model,

    It dominates the breakfast and drive-through business (where a big chunk of its profits originate),

    A dividend yield over 3.4% is more than enough to be paid to wait.


    The pessimist will tell you that:

    Labor costs may increase as more protests arise

    Margins are under pressure due to fierce competition

    Health and Burgers don’t fit well together and the health wings are spreading right now


    I’m sticking to MCD right now, what about you?

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    I must be honest with you; I discovered Disney (DIS) by fluke. It wasn’t on any of my watch lists and never appeared in my filters (since I prefer a dividend yield over 2.50%). I took a look at Disney solely because I wanted to analyze two other related kids’ entertainment companies: Hasbro (HAS) and Mattel (MAT). Those two companies represented great buys aopportunities back in 2012 but I never thought I would end up buying the low yield dividend stock used only for comparison purposes.


    Low Dividend Yield – High Investment Return


    Disney is not exactly comparable to Hasbro and Mattel since the first is more in the entertaining business with ESPN and their theme park division but all three businesses target the same market: kids and their parents. I wasn’t too excited to add Disney after my first analysis but I thought it would be interesting to compare a low yield stock compared to two strong companies with respectable dividend yields (over 3% at that time).


    I was reluctant to add a low dividend yield stock to my portfolio. After all, buying dividend stocks is all about receiving dividend payouts, right? I know many dividend investors who ignore stocks paying 1% in dividend yield. But on May 2013, I decided to buy 45 shares of DIS and I ignored MAT and HAS:


    It was definitely the best decision, but it’s easy to play Monday morning quarterback. My decision was motivated by Disney’s phenomenal fundamentals for future dividend growth. The company currently represents the perfect combination of growth: revenues, earnings and dividend payouts are following the exact same trend. This is quite a feat for any company:



    But This Was Last Year, What About Now – Did You Miss Mickey’s Boat?


    In my opinion, this is still the time to buy Disney. Funny enough, when I bought this stock back last year, it was at its 52 week high…  and if you buy it today (more than one year later), you will still buy it around its new 52 week high.


    I think that if you buy it today, you will probably have to be a little patient before showing a double digit return on your investment. The stock is trading at a 21 P/E ratio which is probably a bit high for the company at the moment. When you look at its P/E ratio history, you see Disney’s valuation a bit overpriced right now:



    Mind you, it’s not the first time the stock is trading around the 20-22 mark. I don’t really mind about the relatively high price to pay for this company since the future looks bright as well. We all know they can work their magic around a character set to boost their profit and they recently bought the biggest character franchise ever created (Star Wars). Once the next Star Wars movie hits the screen; revenues will take another jump. Their recent acquisition of Maker Studios for $500M will boost their distribution channels in this segment and leverage their existing entertainment division (Lucasfilm, Animation Studios and Marvel).


    The US economy is going forward and the consumers’ appetite for entertainment will grow in the upcoming years. Disney is not only a leader in its industry; it has positioned its products to benefit from the next wave of spending. In my perception, Disney looks like a professional surfer ready to take on the next big wave.


    I believe there are several good years to come for this company, what do you think?


    Disclaimer: I hold shares of Disney (DIS)

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    September wasn’t in perfect harmony with this great year on the market. In fact, it was the opposite; we left the month of September with a sour taste in our mouths… similar to what happened in January.


    I don’t know if you recall what happened in January of this year (the human is likely the living being with the largest memory and has an even larger capacity to forget!). After an incredible 2013, investors started to become nervous and greedy. Results were never good enough and everybody started to think the party was ending. It seems we are getting to the same scenario right now. Some people will tell you the magic line “but it’s different this time!


    What we have on the menu of terror

    I’m amused by this investors’ nervous reflex to find ten thousand reasons to see the economy crashing. I decided to call it the “menu of terror”. So if you want to be anxious, you can stop sleeping right away! Here’s the list of reasons why:


    The Menu of Terror

    #1 Huge tension in Iraq

    #2 Huge tension in Ukraine/Russia

    #3 Huge tension in Hong Kong!

    #4 China’s economic slowdown (read less than double digit growth)

    #5 A market that is already overvalued (around 18 times its profit)

    #6 A strong US dollar that could slowdown exports

    #7 The fact the FED printed so many dollars with all their quantitative easing measures

    #8 Canadian housing prices at a crazy level

    #9 Canadians’ debt at a crazy level

    #10 The inability of Central Banks to raise their interest rates without crushing the economy

    #11 Brazil’s social problems and their potential debt arising with the Summer Olympics

    #12 Higher expectations of companies by greedy investors

    #13 The fact that October is historically the worst month for the market (where we experience the worst crashes)


    I’ll stop at 13 reasons because I like this number and want to make sure you are anxious about the market J hahaha!


    What makes you worry right now?

    5 Comments   |   Read more >
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