The US stock market could be in for a riveting week amid multiple household names reporting.

Analysts at ANZ Group Holdings Ltd (ASX: ANZ) are tipping the US Fed to raise rates at a meeting later this week.

The S&P 500 Index (SP: .INX) slid 1.3% overnight, the Dow Jones Industrial Average (DJX: .DJI)slipped 0.77% and the Nasdaq Composite Index (NASDAQ: .IXIC) slipped 1.96% on Monday, US time.

What's ahead?

ANZ highlighted it is a "big week for both central banks and US equities" in a research report released this morning.

Among the US stocks due to report earnings are Apple Inc (NASDAQ: AAPL), Meta Platforms Inc (NASDAQ: META), Caterpillar Inc (NYSE: CAT), McDonald's Corp (NYSE: MCD), General Motors Company (NYSE: GM), United Parcel Service Inc (NYSE: UPS) and Alphabet Inc Class A (NASDAQ: GOOGL).

ANZ senior economist Felicity Emmett said these earnings announcements will provide a "micro overview of the macro economy". She added:

Investors bought into the 'soft landing' view in early 2023, despite the prospect of what could still be a bumpy ride for activity as the lagged effects of last year's interest rates front-loading and still-high inflation bite. 

Meanwhile, the United States Federal Open Market Committee (FOMC) is due to announce an interest rate decision on Thursday morning, Sydney time. ANZ is forecasting a 0.25% rate rise.

Commenting on this outlook, ANZ's Emmett said:

We expect a 25bp rate rise and anticipate that the Fed will caution against an early pause in the tightening cycle and certainly give the notion of cuts no rein.

Risk appetite could be vulnerable to a correction.

US stock market snapshot

Meta shares fell 3% on Monday and have shed 53% in the last year.

Apple Inc (NASDAQ: AAPL) shares lost 2% on Monday and have slid 18% in the last year.

Alphabet shares slid 2.74% on Monday and have tumbled 28% in the past year.

McDonalds shares dropped 0.58% on Monday but have climbed 4.41% in the last 52 weeks.

General Motors shares shed 4.37% on Monday and have slumped 31% in the last year.

Caterpillar shares fell 1.11% on Monday but have soared 29.74% in the past year.

The United Parcel Service share price lost 2.81% on Monday and has slid 12.48% in the last year.

Meanwhile, the S&P 500 Index has shed 11% in the last year, while the Dow Jones has lost 4% in a year and the Nasdaq Composite has shed nearly 20% in the past 12 months.

The post What to watch on the US stock market this week: ANZ appeared first on The Motley Fool Australia.

A dividend aristocrat is a very special thing. It is typically defined as a dividend share that has increased its annual dividend payouts to investors every year for at least 25 years.

Such a long and steady track record shows that a company is financially stable and strong enough to fork out such a large volume of cash consistently.

Over on the US markets, there are many dividend aristocrats. Some you might have heard of include Caterpillar Inc (NYSE: CAT), Exxon Mobil Corp (NYSE: XOM), and McDonald's Corp (NYSE: MCD).

What's more, is that the US markets also boast quite a few dividend kings. These fabled royals of the share market have a 50-year streak of annually raising their dividends. This list is a lot smaller but includes Coca-Cola Co (NYSE: KO), Colgate-Palmolive Company (NYSE: CL), and Altria Group Inc (NYSE: MO).

Does the ASX offer any dividend aristocrats?

Unfortunately, here on the ASX, we have no dividend aristocrats by the US definition. Let alone dividend kings.

But we do have a couple of ASX dividend heavyweights that come close. And they are two shares that I think any investor could comfortably buy and hold for the long term.

The first is Brickworks Limited (ASX: BKW). Brickworks is a building and construction materials company. But it also has a few other earning streams, including from its lucrative property business.

Brickworks has a strong dividend track record. It hasn't raised its dividend for 25 consecutive years, so we can't call it an official dividend aristocrat.

But what it does have is a 45-year history of not cutting its dividends. In other words, Brickworks has either maintained or increased its annual dividends every year since 1976. Definity heavyweight material.

Soul Patts: 3 years to go

The second is Washington H. Soul Pattinson and Co Ltd (ASX: SOL).

Soul Patts is the closest thing to a dividend aristocrat the ASX has. No, Soul Patts hasn't quite got to 25 years of annual dividend raises. But it has upped its annual dividend every year since 2000. That means it's only three years away from becoming the ASX's first dividend aristocrat.

Soul Patts is a rather interesting company. It functions more as a listed investment company (LIC) than a traditional ASX business, owning large chunks of other ASX shares in a massive investment portfolio.

This it runs for the benefit of its shareholders. Soul Patts' largest holdings include TPG Telecom Ltd (ASX: TPG), New Hope Corporation Limited (ASX: NHC), and Brickworks itself.

But Soul Patts also owns a large and diversified portfolio of ASX 200 shares, thanks to the acquisition of ASX LIC Milton Corporation last year. These include your typical ASX holdings like BHP Group Ltd (ASX: BHP) and Commonwealth Bank of Australia (ASX: CBA).

Both of these would-be ASX dividend aristocrats have a long history of delivering meaningful returns to their shareholders. And both boast unrivalled dividend records on the ASX, if not yet long enough to qualify for the 'dividend aristocrat' tag.

As such, Soul Pattss and Brickworks are two ASX dividend heavyweights that I would happily buy and hold until retirement and beyond.

The post 2 ASX 200 dividend heavyweights to buy and hold until you retire appeared first on The Motley Fool Australia.

Something strange is happening with the iShares S&P 500 ETF (ASX: IVV) this week. Back on Monday, units of this exchange-traded fund (ETF) were trading for almost $600 each. But today, this ETF is going for just $39.07 per unit. It also seems to have a new ticker code.

So has this popular ASX ETF really lost almost 95% of its value this week?

The iShares S&P 500 ETF is one of the most widely-held ETFs on the ASX. It's actually the ASX's most popular internationally-based fund. This ETF tracks the S&P 500 Index (SP: .INX), which is the most widely tracked index in the world.

It represents the 500 largest companies on the US markets by market capitalisation. That includes everything from Apple, Microsoft, and Amazon to Exxon Mobil, Coca-Cola, and McDonald's.

So no, this ETF hasn't collapsed by 95% this week. If the US S&P 500 Index was down 95% in one week, we'd certainly all know about it.

Rather, this ETF has just undergone a stock split.

A stock split for the S&P 500 ETF?

A stock split occurs when a company or ETF decides to increase its share (or, in this case, unit) count. It issues new shares (or units) to existing investors, at the same time diluting the value of the existing shares out there.

This has the effect of lowering the share (or unit) price of the company or ETF, but makes up for this by giving away new shares (or units).

This can be done for a number of reasons. But most do so to boost liquidity and to make it easier for investors to buy and sell shares or units.

At the start of this week, one single unit of the iShares S&P 500 ETF would set an investor back almost $600. That makes it a rather unwieldy investment to have to deal with.

This ETF's provider must have thought so too, because back on 23 November, BlackRock announced that the iShares S&P 500 ETF would be undergoing a 15-to-1 stock split.

That means that for every one unit of this ETF, investors now own 15. Concurrently, the unit price of this ETF has just been reduced by a factor of 15.

So if an ASX investor used to own 10 iShares S&P 500 units, worth $5,860, today, they own 150 units, each worth $39.07. Same value, different path to getting there.

So no investor has been left better, or worse off, from this split. It's just a cosmetic change for all intents and purposes.

Is it IVV or IVVDB?

But what's with the new ticker code? Yes, the iShares S&P 500 ETF used to trade under the code 'IVV'. But today, the ETF has seemingly switched to 'IVVDB'. Well, this is a temporary situation.

As we covered last week, part of the stock split process involves the ETF trading under a 'deferred settlement' basis. So today, the 'IVVDB' units represent the deferred settlement units.

This will only be in place until 13 December. That's when the deferred settlement period will have concluded and the ETF reverts to its old 'IVV' code.

The IVVDB units will seamlessly be converted into IVV units when this happens. So if you're desperate to buy the newly-split ETF today, don't let the new code hold you back.

The post Is the iShares S&P 500 ETF (IVV) really down 95% today? appeared first on The Motley Fool Australia.

The Skyfii Ltd (ASX: SKF) share price is exploding today amid an agreement with McDonald's Corp (NYSE: MCD).

Skyfii shares are soaring 45.71% at the time of writing and currently trading at 5.1 cents. For perspective, the S&P/ASX 200 Index (ASX: XJO) is climbing 0.4% today.

Let's take a look at why this ASX tech share is rocketing ahead today.

McDonald's deal

Skyfii has signed a deal with McDonald's to supply technology at eight restaurants in the United States.

The three-year contract has a total contract value of $2 million.

Skyfii will provide the fast food chain with real-time restaurant monitoring and analysis technology. This is an industry first, according to Skyfii.

The data from the technology will enable McDonald's to find out how long it takes for a customer to receive their order. Skyfii has partnered with global strategy and research company Halverson Group on this solution.

Commenting on the news, Skyfii CEO Wayne Arthur said:

The opportunity to partner with both Halverson Group and McDonald's to create an industry-first solution that solves some critical pain points for such a large and
globally recognised QSR brand is a privilege

What else?

Skyfii also delivered an investor presentation to the market today. Total operating revenue lifted 7% on the prior corresponding period to $5.4 million. Net operating cash flow improved 333% to -$0.9 million.

Skyfii said 75% of its new contract wins are outside the APAC region. Of the deals closed, 79% have been in the last six months.

Looking ahead, the company is expecting to deliver another year of "strong revenue growth".

Skyfii share price snapshot

The Skyfii share price has fallen 46% in the past year, while it has lost 48% in the year to date.

For perspective, the ASX 200 has fallen nearly 7% in a year.

This ASX tech share has a market capitalisation of about $21 billion based on the current share price.

The post Happy deal: The ASX tech share rocketing 46% on a McDonald's agreement appeared first on The Motley Fool Australia.

How one allocates their own ASX share portfolio is obviously a very personal decision. We are all different people and investors, with different goals, risk tolerances and personalities. One ASX share might be right for one investor, and wrong for another.

For example, a retiree may appreciate the high dividends that an ASX bank share like Westpac Banking Corp (ASX: WBC) doles out. But a younger investor might wish to go for something with a bit more of a growth profile.

There's no right way to invest when it comes to shares (although there are many wrong ways).

With all this in mind, let's discuss how I allocate my own share market portfolio. As discussed above, this is what works for me, and my own strengths and weaknesses.

Now, I have many many different holdings across my portfolio. So I won't discuss all of them. But I will touch on some theses and strategies that I tend to follow, and explain why.

ASX shares, dividends and franking credits

So to start with, I own a mix of ASX and US shares. This is for many reasons. I love the franking credits and local knowledge that makes ASX investing so rewarding.

But I also love the currency, geographic and economic diversity that comes from investing in the United States. What's more, most of the best companies in the world call the US home.

My selection process is a rather simple one: I look for quality companies, usually with a strong brand, that have demonstrated competency and resiliency over a long period of time.

Let's start with the ASX shares. So I do like a share that pays dividends, preferably those of the fully franked variety. One of my oldest holdings is Telstra Corporation Ltd (ASX: TLS).

I bought Telstra back in 2018 when it was trading for under $2.80 a share. The market hated it then, but I saw a company with a dominant brand providing an essential service. I continue to hold it today for those same reasons.

Another ASX share that is a long-term favourite of mine is National Australia Bank Ltd (ASX: NAB). NAB doesn't have the pricing premium that Commonwealth Bank of Australia (ASX: CBA) does. But I still think it is one of the best-run ASX banks.

My favourite ASX share, though, is Washington H. Soul Pattinson and Co Ltd (ASX: SOL). I've discussed my love of Soul Patts before. But quite simply, it is a diversified market beater with an unmatched dividend record.

Looking across the pacific for my portfolio

Turning to US shares, and again my preference is strong brands and a proven track record. That's why my US shares include names like Apple, Microsoft, Mastercard, Alphabet, Nike and Amazon.

Tesla Inc (NASDAQ: TSLA) is another company that I own. When I first invested in the electric car maker, it was one of my riskier shares. But I have been delighted to see the company grow in size and scale (not to mention value).

Most of my other US shares are within the consumer staples sector. I love the resilience and stability that these kinds of shares can add to a portfolio, as well as the dividends, of course. Among my favourites are Coca-Cola, Pepsi, Starbucks and McDonald's.

Many of these companies have made a habit of raising their dividend every single year, so I have enjoyed watching my dividend income inch up steadily over the years.

So that's my ASX share portfolio in a nutshell and why I own the companies that I do. As I said, it may not be for everyone. But it works for me and my goals. And I sleep soundly every night. What more could one ask for?

The post Here's how I allocate my ASX share portfolio and why appeared first on The Motley Fool Australia.

The stock market suffered a setback on Tuesday, giving back gains from Monday's session amid renewed fears about what the Federal Reserve might do when it concludes its two-day monetary policy meeting on Wednesday. Losses for the Dow Jones Industrial Average (DJINDICES: ^DJI), S&P 500 (SNPINDEX: ^GSPC), and Nasdaq Composite (NASDAQINDEX: ^IXIC) amounted to roughly 1%, with small-cap stocks taking relatively larger hits than their large-cap counterparts.

Data source: Yahoo! Finance.

As the stock market becomes more volatile, investors are increasingly appreciating companies that reward them with predictable and growing streams of dividend income. Today, Microsoft (NASDAQ: MSFT) announced that it would boost its quarterly payout to shareholders. The tech giant pays a relatively modest yield, but some other dividend-stock stalwarts are also in line to pay more to their investors in the near future. Read on to learn more about Microsoft as well as three other companies that could give similar rewards to shareholders soon.

A higher payout for Microsoft

Microsoft stock didn't do all that well on Tuesday, losing almost 1% in the regular trading session. However, long-term investors will get a little bit more from  the software giant in the form of higher dividend checks.

Microsoft's board of directors declared a quarterly dividend of $0.68 per share. Shareholders of record as of Nov. 17 will receive the higher payout, which will show up in investors' accounts on Dec. 8. The payout is $0.06 higher than the previous $0.62 per-share quarterly dividend.

With a dividend yield of only about 1%, most investors don't think much about Microsoft as a dividend stock. Yet the company has developed a solid track record of boosting dividend payouts over time, with the latest move making 2022 the 20th straight year in which Microsoft has paid more in annual dividends than in the previous year.

These companies could be next

Many companies have even longer track records than Microsoft in paying higher dividends. For instance, the following three companies typically announce their dividend increases around this time of year:

• Emerson Electric (NYSE: EMR) has an impressive 65-year track record of paying higher dividends to its shareholders. The company's most recent increase came last November when it announced a 2% boost to $0.515 per share on a quarterly basis.
• Fast-food giant McDonald's (NYSE: MCD) made a larger payout boost late last year, increasing quarterly dividends by $0.09 to $1.38 per share. The Golden Arches chain has a 47-year streak of paying higher dividends for long-term shareholders.
• ExxonMobil (NYSE: XOM) has a 40-year dividend-increase streak on the line as it enters the final months of the year. Last year's most recent payout boost added just a single penny to the quarterly payout, with shareholders receiving $0.88 per share each quarter.

There's no guarantee that these companies will follow through with dividend increases. Every year, there are often at least a few long-paying dividend stocks that have to make payout cuts or even suspend their payouts temporarily.

However, all three of these blue chip stocks have strong businesses underlying them, and they've had the ability to weather difficult economic times in the past and still give their shareholders higher payouts over time. At a time when many investors are feeling increasingly uncomfortable with how much the prices of their stocks have fallen, the extra confidence of knowing that they can receive a quarterly check from these companies is especially valuable.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Microsoft just hiked its dividend. Who's next? appeared first on The Motley Fool Australia.

But one ASX tech share is leaving the sliding benchmark index in the dust.

Plexure Group Ltd (ASX: PX1), which enables retailers to engage with consumers in real time using connected devices and sensors, is up a whopping 76.4% after earlier posting gains of 90%.

This comes after the company updated the market on its contract with McDonald's Corp (NYSE: MCD) as well as updating its earnings guidance.

ASX tech share extends contract with McDonald's

The big share price moving news out from Plexure is the announcement that it's entered into new agreements with McDonald's for its digital customer engagement platform.

Plexure and McDonald's, the ASX tech share's largest customer, have inked a new five-year contract term, which can be further extended if both parties agree.

The company will continue to provide its platform to McDonald's and forecasts positive annual cash flow, compared to previous losses from its Plexure division. It expects to reduce its cost base while delivering operational improvements.

The ASX tech share's digital customer engagement platform supports 147 million daily customer interactions for McDonald's.

Commenting on the contract extension, Plexure CEO, Dan Houden said:

We are excited about our continued partnership with McDonald's and look forward to working collaboratively toward our mutual goal of delivering excellent experiences for McDonald's customers through our world-leading customer engagement platform.

The renegotiated commercial terms with McDonald's represent the culmination of a major transformation of the Plexure division underway since the merger with TASK.

Houden added that with the transformation complete, Plexure can "focus on driving profitable growth by leveraging its combined technology stack to provide an end-to-end cloud engagement and transaction platform at scale for the global QSR and hospitality sector".

The ASX tech share also is likely getting a lift today from its earnings guidance.

Plexure forecasts total revenue for the year ending 31 March 2023 of approximately NZ$56 million, up from NZ$32.6 million reported in the previous financial year.

Plexure Group share price snapshot

With today's big boost factored in, the ASX tech share remains down 40% in 2020. That compares to a year-to-date loss of 28% posted by the All Tech Index.

The post Guess which ASX tech share is exploding 76% on a new deal with McDonalds appeared first on The Motley Fool Australia.

When an ASX investor considers an exchange-traded fund (ETF) for their portfolio, normally the goal is to bring in the market's average return. The whole point of an index fund is, after all, to mimic the market, nothing more, nothing less. But not all ETFs are index funds. That in itself is a source of danger. Remember, beating the market is hard, and most of us statistically don't manage it. That includes active fund managers too.

But one ASX ETF has done a pretty good job. That ETF is the VanEck Vectors Wide Moat ETF (ASX: MOAT).

MOAT is an ASX-listed ETF that tracks a basket of US shares. Not just any or all US share though. This ETF holds a basket of roughly 50 companies that all demonstrate one defining feature: the presence of a moat. A moat is a term originally popularised by the great investor, Warren Buffett. The moat Buffett originally described refers to a companies' intrinsic ability to protect itself from its competition, just as a moat used to do for a castle in days of yore. There are many forms a moat can take, but characteristics such as a strong brand, a cost of stitching away from a company's products or an ability to profitably sell goods or services at the lowest cost on the market are the most well-known.

All of the companies that the MOAT ETF holds display these characteristics. VanEck describes its selection process as "exposure to a diversified portfolio of attractively priced US companies with sustainable competitive advantages according to Morningstar's equity research team".

MOATs float the boat

Here are some of MOAT's current holdings: Facebook Inc (NASDAQ: FB), Coca-Cola Co (NYSE: KO), McDonald's Corp (NYSE: MCD), Amazon.com Inc (NASDAQ: AMZN), Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL), and Kellogg Company (NYSE: K).

Can you identify what might give some of these MOAT holdings their edge? Well, Facebook is the most dominant social media company in the world by a long shot. Alphabet's Google has a virtual monopoly on internet search, as well as internet videos with its YouTube platform. Coca Cola and McDonald's are two of the world's most dominant food and beverage brands, recognised in almost every country on the planet. Kellogg Co is the name in cereal, with the original Corn Flakes brand. And Amazon is, well, Amazon.

But there is a method in this madness. MOAT has handily outperformed ETFs tracking the ASX market like the iShares Core S&P/ASX 200 ETF (ASX: IOZ) per annum over the past 3 and 5 years.

It has also dominated its own benchmark, the US-based S&P 500 Index (INDEXSP: .INX). According to VanExk, MOAT has returned an average of 16.86% per annum over the past 3 years, and 17.74% over the past 5. In contrast, the S&P 500 has returned an average of 13.73% and 14.28% respectively. The iShares ASX 200 ETF has returned an average of 9.53% and 10.10% per annum over the same periods.

The numbers are clear here: the VanEck Vectors Wide Moat ETF has smashed the market. Especially where it counts: over the long term.

The post This ASX ETF is smashing the ASX 200… and the S&P 500 appeared first on The Motley Fool Australia.

McDonald's Corp (NYSE: MCD) just closed the books on a forgettable year for the business. COVID-19 continued to sink customer traffic across its global portfolio of stores through the end of 2020, the fast-food giant said in its recent earnings report. 

Yet McDonald's notched a few wins that point to a better 2021 ahead, assuming the pandemic threat fades over the next few months.

Let's take a closer look.

McDonald's steady rebound continued in the three months that ended in late December. Comparable-store sales were down just 1% globally, compared to a 2% drop last quarter and a 25% slump in fiscal Q2. Declining revenue isn't normally a cause for celebration, but management highlighted several bright spots in a tough year.

These include the fact that sales landed in modestly positive territory in the core US market thanks to a quick shift to a drive-thru and home delivery focus. That result kept the chain ahead of peer Starbucks for the year, but trailing Chipotle Mexican Grill.

"2020 will be remembered as one of McDonald's most challenging ... moments in our long history," CEO Chris Kempczinski said in a press release.

Earnings are down

The earnings picture is less encouraging and reflects the depth of the chain's operating slump in 2020. Profits in Q4 fell 9% after excluding currency exchange rate shifts, and were down 20% for the full year. That metric trailed McDonald's revenue trend thanks to extra costs related to COVID-19 safety and elevated marketing spending aimed at supporting franchisees.

The fast-food industry has become more competitive in recent months as national chains fight over pieces of a flat market.

MCD Cash from Operations (TTM) data by YCharts

McDonald's finances endured a COVID-19 hit but they're still strong. Operating cash flow declined by roughly $2 billion in 2020 yet was solidly positive at $6.3 billion.

The chain continued spending cash on its growth initiatives like store remodels, product launches, and delivery.

"By investing for the future and leveraging competitive strengths, we're confident we can continue to capture market share and drive long-term sustainable growth," Kempczinski said.

Looking ahead

Management didn't issue a forecast for the new fiscal year, but McDonald's is likely to report significant growth this year. The fiscal first quarter, which started a few weeks ago, is up against a prior-year period that included significant early impacts from the pandemic. Comps dove 13% in the US in March last year and fell 35% in the company's core international segments. Both areas should see significant improvements when compared to those slumps.

The big question is when the chain can get back to setting sales and earnings records again on an absolute basis. Continued modest improvements like the one the chain just announced would mean McDonald's could reach that revenue mark in 2021. The profit rebound will take longer.

That means shareholders should brace for a volatile period ahead for the business, and for the stock, until the rebound path looks clearer by late 2021.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post McDonald's bounces back to growth appeared first on The Motley Fool Australia.

Costco Wholesale Corporation (NASDAQ: COST) and McDonald's Corp (NYSE: MCD) are venerable companies that have proven popular with consumers over many years. They have become dominant through their focus on providing value to customers.

Last year's results took divergent paths, which each stock reflected. Costco's stock price increased by 28%, besting the S&P 500 Index (INDEXSP: .INX) 16%. Meanwhile, McDonald's shares underperformed the overall index with a more than 8% gain.

But the market typically looks at short-term results. To figure out which is the better long-term stock investment, it is time to dig deeper into each company's prospects.

A popular destination

With more than 39,000 establishments in more than 100 countries, McDonald's golden arches are perhaps the restaurant industry's most recognisable symbol. However, it doesn't own the majority of restaurants. Rather, it franchises 93% of them, in which the franchisees pay McDonald's an upfront fee plus an ongoing percentage of its sales. It is also a landlord in many instances, so it also receives rent.

Heading into 2020, McDonald's, with its inexpensive food and quick service, was doing well. Its 2019 comps rose by 5.9%, with higher guest counts contributing one percentage point. This was due to changes management implemented, such as all-day breakfast, new menu items, and a focus on the "3 Ds"– digital, delivery, and drive-thru. The company's operating income grew to $9.1 billion, 27% higher than 2015's $7.1 billion.

Last year, with governments imposing social distancing guidelines, was a different story. Still, results showed an improvement in the third quarter as governments relaxed restrictions, and its previous push of the 3 Ds proved fortuitous. Comps were down 2.2%, but they did better each month.

While cases are surging, creating some near-term uncertainty as governments and people react to contain the virus, McDonald's long-term prospects look promising with its affordable menu that it is constantly tinkering with to adapt to consumer preferences (including reintroducing the popular McRib for a limited time), and the company continues to push the 3 Ds.

The company's dividend track record, raising it for 44 consecutive years since its first payout in 1976, is impressive. This includes boosting December's payment by 3% to $1.29. The stock's dividend yield is 2.4%.

Offering members a good value

Costco is not your typical retailer. It operates warehouses that offer a variety of goods sold in bulk and services at lower prices than members can typically find elsewhere. It charges members to shop there, and they happily sign up and stay on. The number of paid memberships has grown from 47.6 million to 58.1 million over the last five years. It consistently has a nearly a 90% renewal rate worldwide.

With positive same-store sales (comps) for many years and increased profitability, Costco is executing its plan to serve members by offering them high-quality merchandise at low prices. Over the last five years, its operating income grew by nearly 50% to $5.4 billion.

The company got off to a good start in 2021, too. For its first fiscal quarter, which ended on Nov. 22, comps were up by 17.1% after excluding gasoline price changes and foreign currency exchange translations. Costco's operating income increased by 35% to $1.4 billion.

Costco's success is leading management to continue opening new warehouses. Historically, it added 20 to 25 clubs annually. It ended last year with 795 and opened eight in the first quarter, with plans to add 20 to 22 for the year.

The company has also built an impressive track record of raising dividends annually since its initial payment in 2004. Its 0.7% dividend yield pales in comparison to some companies, but it has bright growth prospects. Costco has also paid large, special dividends to shareholders every few years, including a $10 payment last month.

The decision

Choosing between Costco and McDonald's is a tough call. Both are well recognised, popular destinations. For me, Costco comes out ahead due to its ability to draw in members based on its offerings, which have produced consistently improving results.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Better buy: McDonald's vs Costco appeared first on The Motley Fool Australia.

It's arguably the world's most recognizable chain of restaurants, with over 39,000 locations found in more than 100 countries. Its golden arches remind consumers they can enjoy a familiar, comforting meal almost anytime and anywhere they want.

The chain in question is, of course, McDonald's (NYSE: MCD). It's evolved over the years, but its appeal -- and success -- has effectively leveraged the idea of sameness. That is to say, customers like the fact that eating at a McDonald's is at least a partial nod to the past; the value isn't too shabby, either. This foundation is a big reason investors can look forward to more growth from the restaurant chain in the future.

Still, there's one development that would-be shareholders would be wise to put on their radar.

Plenty of growth

Not every business idea McDonald's comes up with is a winner. For example, the live-action Hamburglar meant to modernize the hamburger-stealing cartoon character and introduced in 2015 ended up being more creepy than cool. And, although the company would probably like to, let's not forget McDonald's once dabbled in pizza (back in the late 1980s).

By and large, though, the restaurant chain boasts more hits than misses, especially when it needs them the most. One only has to look four months back to find an example of the chain's frequent strokes of brilliance.

While life in parts of the country is somewhat getting back to (the new) normal, as of early September, the fallout from the COVID-19 pandemic was still in full swing. Debates over the risk of restarting school were heated, while restaurants and retailers were still very restricted as to what they could and couldn't do. Millions were still unemployed all over the world, and discretionary spending was crimped ... even if just for logistical reasons. The fast-food giant's second-quarter numbers proved it. Sales for the three-month stretch ending in June were down 29% year over year. Income fell 67%. Simply put, the company needed help.

Travis Scott came to the rescue.

You may not know who the relatively new musician and entertainer is, but younger fans of pop and rap music do. His star power was enlisted to help McDonald's sell a $6 meal combo in September. The promotion was so successful that the company struggled to fully meet demand. McDonald's eventually reported that September's sales marked the best single month in almost a decade.

One good month or one savvy promotion doesn't inherently make a company a winner. The fact that McDonald's was able to act as well as it did when it did is a microcosm of its entire operation, though. Not every idea is a winner, but the ones that are end up being very big deals.

This reality is evident in the numbers. Earnings aren't growing in a perfectly straight line, but they are growing pretty consistently, and are expected to keep growing from here.

Data source: Thomson Reuters. Chart by author. Revenue and operating cash flow figures are in millions of dollars.

As for revenue, yes, it's been shrinking, but that's by design. The organization has been paring back its ownership of restaurants by selling them to franchisees. As of September, 36,438 of the world's 39,096 locations (6.8%) were franchise properties, up from 29,851 of the 36,405 McDonald's locales (18%) five years ago. The move ultimately means lower sales but potentially more profits since franchisees' fees and royalties are higher-margin revenue. This transition is largely complete now, translating into sales and earnings growth going forward.

Just keep tabs on franchisees' frustration levels

That said, the company's strategic shift away from restaurant ownership and toward a more profitable franchising focus has coincided with what some would characterize as an increasingly unfair burden on local operators.

Franchising is usually a symbiotic relationship within the fast-food industry. A well-known outfit like McDonald's or rivals such as Wendy's or Subway bring brand recognition and national advertising to the table, while localized businesspeople offer labor and remote management. These entrepreneurs also supply franchisors with recurring royalty revenue.

Being a McDonald's franchisee is neither cheap nor easy, though. Not every operator wants to serve every menu item the corporation pushes its restaurants to offer. Ever-increasing promotional costs and required remodels have also become more and more common, as have frustrations regarding rent payments; the parent company owns its restaurant real estate and then leases it to franchisees at rates based on that store's sales. And, despite coronavirus-related headwinds, early this month the parent unveiled new, additional franchise fees to be imposed beginning in 2021 at the same time as some operator subsidies were altogether canceled.

In response to new fees announced this month, some franchisees are rethinking their willingness to continue offering value-oriented parts of their menu. Others are mulling increased prices for Happy Meals, while still others are reportedly considering slightly higher prices across the entire menu.

And rather than cooling off over time, this infighting still appears to be ramping up.

Bottom line for McDonald's

It's not a fatal flaw, and certainly not one that could prove immediately disastrous. Even on its worst days, McDonald's is a more reliable cash collection mechanism than many other fast-food chains. As was already noted, it's the most recognizable name in the business for a reason. It's also been a great investment for the same reason.

Nevertheless, the tensions between the parent company and franchisees not only seem to never end but may even be worsening. This sort of adversarial dynamic poses the risk of pushing franchisees out of the McDonald's network while preventing other prospective franchisees from ever teaming up with the company.

It's still not a reason to avoid the stock, though ... at least not yet.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Is McDonald's stock a buy? appeared first on The Motley Fool Australia.

Ray Dalio founded (and used to run) one of the world's largest hedge funds – Bridgewater Associates – back in 1973. Bridgewater is perhaps most well known for its significant outperformance during the global financial crisis back in 2008–09. It was able to do this through a strategy of 'macro-investing'.

Macro-investing involves deploying capital based on global economic factors, rather than individual stock picks. 

With more than US$140 billion in assets under management, Dalio and Bridgewater are areas that many investors like to keep an eye on. Just a few days ago, we covered how Dalio is warning investors to stay away from cash and bonds as asset classes in the current economic environment.

But today, we get a rare glimpse into which investments Dalio and Bridgewater have been buying of late.

According to reporting from Business Insider, Bridgewater's 13F filing was made public earlier this week. A 13F is a regulatory filing in the United States that outlines the company or fund's current investments. All major companies and investment funds in the US have to release a 13F to the markets every quarter. 

Dalio buys emerging markets, consumer staples

As reported by Business Insider, Bridgewater has been offloading investments in several exchange-traded funds (ETFs). The 3 largest funds Bridgewater is ditching are an S&P 500 fund (covering large-cap US shares), as well as 2 Chinese-based ETFs. Dalio reportedly offloaded about US$309 million in the S&P 500 ETF, and between $US12–34 million in the 2 China ETFs.

Where did this money flow to? Well, the report tells us that Bridgewater initiated large positions in 2 US giants: Walmart Inc (NYSE: WMT) and the Coca-Cola Co (NYSE: KO). He also topped up positions in McDonald's Corp (NYSE: MCD), Mondelez International Inc (NASDAQ: MDLZ) and Procter & Gamble Co (NYSE: PG).

Additionally, Bridgewater also topped up a position in Alibaba Group Holding Ltd (NYSE: BABA) – a Chinese e-commerce giant. In addition, the report tells us that the firm also bought positions in 2 emerging markets ETFs. These normally include China as well as other emerging markets like India, Russia and Taiwan.

Interestingly, Dalio has said in the past that "not investing in China is risky". So it's fascinating to see Bridgewater sell out of China ETFs and buy emerging markets funds instead.

It's also notable that Bridgewater has decreased the broad-market exposure that the S&P 500 provides in place of large investments into consumer staples stocks like Coca-Cola, Walmart, McDonald's, Mondelez and Procter & Gamble. These stocks tend to be viewed as 'defensive' due to the 'staple' nature of the products they sell, such as food, drinks and household essentials.

The post Fund king Ray Dalio ditches China for Coke (NYSE:KO) appeared first on The Motley Fool Australia.

Five years is a long time, and predicting the future path for a social media giant like Facebook, Inc (NASDAQ: FB) is fraught with uncertainties as it is with any company.

Facebook has succeeded in getting a significant percentage of the world's population on its platform. However, that level of success naturally leads to questions as to whether investors can continue to friend this communication stock over the long term. Nonetheless, the company has moved into other tech niches that could ensure its growth for another five years, and perhaps beyond.

The coming growth crunch

Indeed, the near-term outlook for Facebook could bring an increasing number of likes. Although the company declined to give earnings guidance in its second-quarter 2020 report issued in late July, it believes year-over-year ad revenue will grow by about 10% in the upcoming quarter. Also, analysts expect profits to rise by 25% this year and by 27% in fiscal 2021. Facebook also maintains a base of 3.1 billion monthly active users, an increase of 12% over the last year.

Still, its current apps could face a significant growth limitation over the next five years that investors normally associate with companies like Coca-Cola Co (NYSE: KO) and McDonald's Corp (NYSE: MCD). Facebook's current user base is about 40% of the world's population. Given that a large percentage of the unserved population does not have broadband access, Facebook could soon face global market saturation.

Where Facebook will find additional growth

Hence, for the next five years, the company will likely have to lean on additional platforms to maintain its current growth rate. For now, those platforms are Portal and Oculus.

Portal is Facebook's smart video hardware. It allows for video calls using WhatsApp and Facebook Messenger and has Amazon.com, Inc's (NASDAQ: AMZN) Alexa built into its product. However, Amazon offers a similar product called Echo Show, so the growth prospects for Portal remain unclear.

Nonetheless, Facebook could bring a more profound change to the tech market through Oculus. Oculus is Facebook's virtual reality (VR) hardware, which will offer a simulated environment for users.

To Facebook's credit, it holds a competitive advantage with Oculus. Facebook technically lags Sony Corp (NYSE: SNE) in the sale of VR headsets, according to technology market research provider TrendForce. However, Facebook sells untethered devices, while Sony ties its headsets to its PlayStation gaming console.

Moreover, high consumer demand for VR devices exists, and at $299, the new Oculus Quest 2 will sell for $100 less than its predecessor. Facebook will likely develop applications aimed at its massive user base, further widening its competitive advantage over prospective competitors.

For now, Facebook defines sales of Portal and Oculus as "other revenue." While the $366 million in other revenue made up only a small portion of Facebook's $18.7 billion in revenue in the second quarter, the category grew by 40% from year-ago levels. In percentage terms, this growth rate is far ahead of advertising, which expanded by 10% over the same period.

Furthermore, considering the anticipated growth, Facebook remains a reasonably priced stock. It trades at a forward price-to-earnings (P/E) ratio of about 24, a modest multiple considering the profit growth predicted in the near term.

Facebook in five years

At its current valuation, Facebook is a clear buy. Looking five years ahead, investors who friend Facebook stock now should benefit from significant growth, especially if the company meets analyst profit-growth estimates.

However, investors should expect the company to have a different focus at that time. Instead of looking at ad revenue through rose-colored glasses, stockholders should put on an Oculus headset and prepare for a ride that is virtually assured to bring a more profitable reality. Even though VR products make up only a small percentage of revenue now, this category should continue to grow much faster than Facebook's ad revenue.

VR's power will not lie so much in hardware, which tends to become commoditized. Since Facebook now has over 3.1 billion users, VR will probably help it monetize its customer base, offering Facebook a competitive advantage over its peers.

Investors have already seen massive returns from Facebook's ability to connect people. Over time, the stock will probably move much higher as it makes VR-driven returns a reality.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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