Many investors believe that a decline in the value of the U.S. dollar is a bad thing, but the other side of the equation is that a 澳洲幸运5开奖号码历史查询:weak dollar presents several profit opportunities.

A falling dollar diminishes its purchasing power internationally, and that eventually translates to the consumer level. For example, a weak dollar increases the cost to import oil, causing 澳洲幸运5开奖号码历史查询:oil prices to rise. This means a dollar buys less gas and that pinches many consumers. While that scenario is unfortunate, investors can have their revenge, so to speak, by investing in the stocks of U.S. multin🔯ational corporations, which earn a significant portion of their profits overseas.

As more 澳洲幸运5开奖号码历史查询:emerging markets acquire a taste for American products, these companies will send more products across the globe, boosting their 澳洲幸运5开奖号码历史查询:bottom lines and, perhaps, shareholder returns.

How Do Multinationals B💦enefit When the D✃ollar Falls?

So how do these multinational companies benefit when the dollar falls? Let's say a U.S. company does a lot of business in Europe and the euro is strong against the dollar. The company's profits from Europe will be denominated in euros and when those euros are converted against a weak dollar, there are more dollars for the American company and a nice jolt to the bottom line. Better 澳洲幸运5开奖号码历史查询:profit margins usually translatဣe to better results for shareholders.

Quintessential Multinationa꧋ls and Their Relationship to the Dollar

Two of the best examples of U.S. multinationals are McDonald's (NYSE: MCD) and Procter & Gamble (NYSE: PG). These two companies are among the biggest in the U.S. and the most recognizable on the global stage. McDonald's has unrivaled 澳洲幸运5开奖号码历史查询:brand recognition and millions of homes across t𒁏he world have at least one Procter & Gamble product.

Both companies derive substantial chunks of their annual sales from international markets, putting them in a prime position to benefit when the dollar slumps. Procter & Gamble in particular benefits when the dollar is weak because it manufactures a fair amount of its products in the U.S. Two of its biggest rivals, Nestle and Unilever (NYSE: UL), are foreign firms.

Let's use the example of the euro, since Nestle and Unilever are European companies. A strong euro can hurt the bottom line at these companies, while P&G bolsters its profits by way of a weak dollar.

It's probably a stretch to say that the executives of U.S. multinationals spend their time cheering for a weaker dollar, but the reality is that their companies benefit from the scenario.

Do Shareholders Benefit from a Weakened Dollar?

Empirical evidence supports the notion that shareholders in U.S. multinationals win when the dollar loses. Look no further than McDonald's as an example. Compare a chart of McDonald's shares to the 澳洲幸运5开奖号码历史查询:U.S. Dollar Index, which tracks the performance of the dollar against a basket of major currencies an🍎d the results are startling. The more Big Macs and fries that are gobbled up in countries with currencies that are beating the dollar, the morඣe McDonald's shareholders benefit.

While investors benefit from the 澳洲幸运5开奖号码历史查询:capital appreciation in multinationals when the dollar is weak, it's hard to quantify whether the added profits translate into higher 澳洲幸运5开奖号码历史查询:dividends for shareholders. That said, McDonald's and P&G have previously raised their dividends during dollar slumps, so it doesn't hurt the chances for ꧙a dividend hike when the dollar is declining to increase investor confidence.

Another way shareholders can benefit when the dollar is weak is through 澳洲幸运5开奖号码历史查询:acquisitions. A weak dollar can prove irresistible for foreign companies looking to acquire solid U.S. companies for a discount. This isn't limited to small U.S. companies, as Anheuser-Busch, a true American multinational and one of the country's most venerable corporations, was acquired by InBev in 2008 due in part to the euro's strength against the 澳洲幸运5开奖号码历史查询:greenback.

Made in America: U.S. Exporters and the Dollar

There are other benefits to a weaker dollar for large U.S. exporters. For starters, they can raise their domestic currency prices, which translate to the same price overseas. Higher prices equal higher profits.

If the dollar stays consistently weak for extended periods of time, U.S. multinationals may also be compelled to keep more manufacturing and production operations in the U.S., because the cost of foreign goods can be higher. There is a 澳洲幸运5开奖号码历史查询:trickle-down effect in that more Americans are working, which benefits the U.S. economy at large.🙈

Of course, 澳洲幸运5开奖号码历史查询:Uncle Sam likes it when giant multinationals make more money because that means they'll be paying more in taxes. While the increased tax burden is never welcomed by company executives, the IRS sure loves it and it is rarely punitive enough to meaningfully impact the stock price, to the r💎elief of sharehol💖ders.

Pitfalls of a Weak Dollar

From the shareholder's perspective, a weak dollar can be a good thing in moderate doses, but there are pitfalls to a prolonged dollar slide. Obviously, a weak dollar reduces 澳洲幸运5开奖号码历史查询:purchasing power for American consumers, and this may send them over to 澳洲幸运5开奖号码历史查询:generic brands rather than higher-cost premium offerings produced by multinationals.

A weak dollar can also impact trade with nations with strong currencies. Some companies build plants or sign multiyear contracts expecting a certain currency 澳洲幸运5开奖号码历史查询:conversion rate. A major change can weigh on a company's bottom line to keep converting a weak dollar into a strong local currency and lead foreign companies to r♊educe trade with the U.S. However, the downfall here is the potentialꦛ for lost jobs and lower tax revenues.

The Bottom Line

Periods of dollar weakness can benefit 澳洲幸运5开奖号码历史查询:shareholders in U.S. multinationals. Historical trends have supported that trend, but those tidy returns usually come over periods of several quarters, not years. A dollar slump that extends into five or 10 years is not good business and makes U.S. companies and their shareholders vulnerable to acquisitions by foreign rivals. Therefore, if your 澳洲幸运5开奖号码历史查询:portfolio has benefited from the dollar's slide for a few months, it might be time to bre♔ak out the pom-poms and cheer for the greenback to 🔥rise.