How to Make Money Off the Tax Rebate

The Economic Stimulus Plan is moving it's way through Congress and looks to be passed soon. Though it is not in it's final form yet it looks like Americans will be receiving the Tax Rebate Checks in May. The tax rebate checks look to be over 100 billion dollars that are primed to enter the economy in 300-600 dollar increments. The design of the plan is a direct cash injection into the economy to get things moving with an emphasis on being spent.

In my situation putting the tax rebate in my IRA is what I would rather do than spend it, and I believe the infusion into the markets will help me and the country. But most of the lower and middle income recipients will spend it and quickly, which is what the government wants. With all of that money coming into the economy I have been looking at where it is most likely to go.

Since the amounts are between 300 and 600 dollars I don't see many people buying new houses or cars. I think that Wal-Mart and McDonalds will reap some of the biggest returns of the package. The tax rebates are the perfect size for both to get a pretty good sized piece of the action. Wal-Mart and McDonalds are strong companies that are expanding internationally, especially in China. Both of the companies stocks have been down over the past week because of U.S. recession forecasts.

Wal-Mart (WMT) is even starting to slash prices and call it their economic stimulus plan which they are starting with Super Bowl staples. The stock was over $50 a share last week and is a better deal at under $49 today. Wal-Mart also pays a dividend of 1.8% which is still a fair dividend though not astronomical. A couple quarters down the road I think we will see that Wal-Mart got a lot of the money.

McDonalds (MCD) which is even in quite a few Wal-Marts should benefit from the tax rebates as well. Since children are allotted $300 per child rebate the parents will ultimately make another trip to McDonalds for the kids. Last Friday McDonalds shares were over $54 a share, because of bearish future predictions it was under $51 today. McDonalds stock also pays a 2.8% dividend which was recently increased.

Both companies have good numbers but the stocks were penalized because of recession fears. From what I can see the stimulus package takes some of the risk out of these stocks and give them an advantage.