Author Topic: How Dividend Work - Mcdonalds?  (Read 3999 times)

cbr shadow

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How Dividend Work - Mcdonalds?
« on: December 14, 2012, 09:57:37 AM »
I'm newer to investing.  I do a 401k and Roth IRA through Vanguard which is very simple to use.  I always have my dividends reinvested.
I'm thinking about taking some "fun money" and investing in McDonalds.  Can someone explain how the dividends work?  I see they're at 3.41% right now, so does that mean that if I invest $1000 I can expect 3.41% back in dividends, 4x per year?  So without reinvesting that money I can get a (3.41% * 4) 13.64% return on my investment?
I'm probably looking at this the wrong way, so please help me out.
Also, is this a good long-term investment? 

JohnGalt

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Re: How Dividend Work - Mcdonalds?
« Reply #1 on: December 14, 2012, 10:00:49 AM »
3.41% will be the annual dividend amount.  So, if it pays quarterly, you would get 3.41%/4, 4 times per year. 

iamlindoro

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Re: How Dividend Work - Mcdonalds?
« Reply #2 on: December 14, 2012, 10:03:21 AM »
It means you can expect 3.41% over the course of the year.  This is usually distributed quarterly.

As to whether it's a good long term investment, that's going to be a matter of some opinion.  It should be relatively low risk as McDonald's certainly isn't going anywhere.  It will also be relatively low growth as McDonalds is, well, everywhere.  I would anticipate growth to be slow but steady as McDonald's goes into emerging markets, and the worldwide obesity problem continues to get worse.  I also happen to think that McDonald's is large and clever enough to adapt to trends.

In other words, don't expect to do a whole lot better than the market as a whole, but don't expect to be out your money entirely either.

cbr shadow

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Re: How Dividend Work - Mcdonalds?
« Reply #3 on: December 14, 2012, 10:13:38 AM »
Thanks for the clarification guys. 
So compared to an index fund, in the long term I can expect (from what I've read here) about 8% return.. compared to buying just Mcdonalds and getting 3.41% per year.  Am I correct in thinking I'm better off just purchasing more VTSMX?

JohnGalt

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Re: How Dividend Work - Mcdonalds?
« Reply #4 on: December 14, 2012, 10:22:11 AM »
Thanks for the clarification guys. 
So compared to an index fund, in the long term I can expect (from what I've read here) about 8% return.. compared to buying just Mcdonalds and getting 3.41% per year.  Am I correct in thinking I'm better off just purchasing more VTSMX?

It's more complex than that (and no one can really tell you whether or not you'll actually be better off with 1 stock vs a broad index fund/etf).  Mcdonalds stock value could either appreciate or depreciate and they could also increase or decrease their dividends.  Dito for VTSMX (which also pays dividends) as it is just buying you lots of individual stocks that each have similar performance options to Mcdonalds (in fact VTSMX probably includes Mcdonalds). 

To be honest - if you're asking these questions - you are probably better of buying more VTSMX while continuing to research and learn about how to evaluate individual stocks for investment before picking anything. 


James

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Re: How Dividend Work - Mcdonalds?
« Reply #5 on: December 14, 2012, 10:40:55 AM »
To be honest - if you're asking these questions - you are probably better of buying more VTSMX while continuing to research and learn about how to evaluate individual stocks for investment before picking anything.


+1


Sounds like you would like to know more, so I'd find a good book and start following some good investment blogs.

COguy

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Re: How Dividend Work - Mcdonalds?
« Reply #6 on: December 14, 2012, 11:10:38 AM »
If you insist on dividend investing, here is a link to about 10 articles that will get you started on dividend investing and figuring out how to value such stocks

http://beginnersinvest.about.com/od/dividendsdrips1/tp/dividend-investing-guide.htm

Also, because I cannot miss an opportunity to give him a shout out, read Jim Collins article on dividend investing and other popular strategies over the years. 

http://jlcollinsnh.wordpress.com/2012/01/02/magic-beans/



iamlindoro

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Re: How Dividend Work - Mcdonalds?
« Reply #7 on: December 14, 2012, 11:33:52 AM »
All of the above is absolutely great advice.  I have nothing further to add. 

Well, almost nothing ;)

Index fund investing may not seem as "sexy" as picking stocks, but it's a hell of a lot more likely to successfully generate worthwhile returns (while also not sapping your gains with transaction fees and other BS).  Check out the thread here too for a great video revealing the fact that brokers and managers' jobs are to get more of your money in their pockets, not to see you achieve your financial goals.  While you are picking stocks, brokers and managers are themselves quietly pouring their money into index funds.

http://www.mrmoneymustache.com/forum/investor-alley/passive-investing-the-movie/