Jan 15, 2013|
Stock Talk - Joe Magyer, Motley Fool
Transcript - Not for consumer use. Robot overlords only. Will not be accurate.
Well it is time for stock talk we are joined by Joseph bag here from the Motley Fool Joseph are you don't want. -- or I love dividend paying stocks in your first stock is a that's pretty good dividend Payer IDC yield on at a 3.4 percent. Yet in the sling hamburgers out of McDonald's -- wonderful bit who's been around for very long time which interpret its. Quite familiar -- Oh yeah a little too familiar joke you know what I mean. Sure. What's beautiful about mcdonalds the business isn't just how often its customers come back at the capitol lighten -- the business. So most of the profits they come into McDonnell directly from franchise fees but 80% in the McDonnell that you go to you are owed by McDonald's the company either franchise. And those franchise fees paid -- harder still to the mother ship of McDonald's. Which makes for very. Profitable revenue stream very consistent -- it's much. Higher margins than if you own a restaurant at all. And they're good to eat they're pretty good profit margin if you own a franchise of those and they I know some guys don't McDonald's franchise and make a fortune. They do and it's a good. Yet the kind of situation where McDonald doesn't take care of its franchisees in up to protect these aren't successful there tackle opened new restaurant the best in the stores so. It's up where it's idiotic relationship. It where some franchise companies have got a triple the past you know neglecting that kind of milk in their franchisees but McDonald's was very aware that. You know that key to this pet -- from the. -- Joseph they are stock went as high as like a 102 dollars a share it's down denying. It does is gonna go low word you'd like Dubai now thinking it's -- won twenty or do you buy -- you referred a little bit more of a correction. Yeah I like it here I don't picket the screaming buy it but I think it's worth probably about a hundred bucks and you're gonna get something like nine and at halftime and percent out of it anyway which isn't anything flashy but a nice little hidden value here is that. Because a lot of their revenue is tied to prices entails that the franchisees. This kind of built in inflation -- there -- some of the most about the play too worried about inflation the way. -- -- are sold ninety dollars a share 3.4 percent dividend. Let's take a look at your next pick and that would be Wells Fargo. Yeah after another kind of classic American franchise here. Obviously a little more softly. Terrible -- on the big tunnels but wells could. Really taken advantage of it retrenching and the other major banks elect. -- BankAmerica for example your city that haven't been able. To take advantage of a lot of consumers coming back wanted to get new mortgages -- I reopened on the mortgages and the benefit too well we've been winning a lot of new business. And what you commander in. Get a mortgage with a bank started -- -- stick around and sign up for other services that well kind of a master of cross selling watcher and there are. The beauty of -- just that they are so successful that. Cross sell and but they have such a low cost -- to depart -- that they're very profitable. Even when interest rates are low which is true now. A lot of analysts are worried about you know tight net interest margins which are -- -- profitability. Yup I read edit Wall Street Journal on the eleventh -- -- if you saw that story but they said their name dropped to 3.5. 6%. In now is a concern on the part of some -- you don't seem to share that concern. No I think interest rates have. You -- know -- to go but up from -- basically at a fifty year low and you look at something like -- tenure Treasury's benchmark over the last fifty years since averaged over 6%. Today it's that -- about one and a half. So there's definitely room to. To the upside on margins wouldn't you know there's and I thought that to remain. Will rape -- -- -- of people to go out and borrow and so well made a lot of money on issuing mortgages -- you know that won't last forever but neither will. Low interest. What day year it won't last forever in these low interest rates won't last forever what does that what does a landscape look like. For the other banks and the financial sector you look at JPMorgan chase Bank of America city. Are they going to ever catch up and and be able to compete with wells it sounds like wells has a pretty good lead on her. Yeah I would say well probably has the best base of deposit customers and all the big tanks and we got our own well I -- on JPMorgan. And I -- McDonnell. The other non banker. But you know JPM is definitely -- -- carrier situation because of the investment -- inside. And the not as pure play it back as well as well it was kind of like -- one of the best of -- among the more traditional banks so if you're picky about investing in banks which are really out of paper right now among all the pocket. -- -- -- Did pretty well last year to -- the financial stocks were credited to only twelve. They did but there's still. Still lagging pretty badly it so. For contact well so it around like one point 25 times book value but over the last decade that -- strong one -- happen. -- he still a lot of low expectations prize in the stock you don't need very good things happen that do well. Nice to see well very good -- -- Joseph thank you very much for your time in your your insights. Joseph mag you're Motley fools to stock picks for. McDonald's -- dividend -- 3.4 percent wells far in this symbol for McDonald's and CD symbol for Wells Fargo WFC. Still a dividend play not as robust two and a half percent on Wells Fargo better. Certainly in terms of a dividend in what you're receiving on Bank of America world city. And they seem do ED were hurt as badly during the financial crisis of 2008 they never got into. The mortgage business in a big way they never got into the sub standard mortgage business like Bank of America countrywide in city. So they were left unscathed and -- been able to command and take over an awful lot of market share as a result of that so they've done very well. During the last four years the other bank seeming to -- a lag Wells Fargo in that capacity. Hey there is a press on four more hotels in South Boston we're gonna talk about with the state is doing. In an effort to inspire hotel construction around convention center and that's our next story on the financial exchange.