Sunday, March 6, 2011

McDonald's Corporation Stock Analysis (Member of Dividend Aristocrat List)


McDonald's Corporation (MCD) is a proud and long-term member of the Dividend Aristocrat list.  As we all know, they are a giant in the food industry and do an extremely large amount of business inside and outside our United borders.  During economic turmoil, people that want a cheap/quick meal head to the good old golden arches and munch on Dollar Menu items.  Their growth is still there as they explore further emerging market strategies.  Let's get to the analysis..

P/E Ratio: McDonald's current share price is $76.03 with an earnings per share of $4.58.  P/E breaks down to (76.03/4.58) 16.6.  Not incredible higher than the "15" that I like, it does fit in my range.  MorningStar places it against other in their industry with an average of 22.1.  Extremely undervalued when you compare it to it's top competitors.  Very attractive to an investor.

Potential Appreciation: McD's 52 week high stands at $80.94.  This currently gives it a ((80.94-76.03)/76.03) 6.5% appreciation upside based on the past history.  However, I wouldn't add MCD for appreciation to my portfolio.  I would add it based on the brand-sake and their beautiful dividend yield and consistency in that growth, to which I break into next..

Dividend Yield & Payout: Now McDonalds has consecutively paid and increased Dividends for over 34 years now and continues to do so at a nice increasing rate.  Their current yield of ($0.61*4) 3.21% is extremely attractive as it is over the 3% mark that I enjoy.  The payout ratio of $2.44/$4.58 = 53.27%; almost smack down in the middle of my 40-60% range = another thumb's up in my book.  Last increase  from 55 cent to 61 cents per share provided an 11% increase alone.  They paid a 33% increase back at the end of 2008 aka during one of the worst financial time periods we have endured.  Wow.  Really solid if I may say.

Conclusion: McDonald's is a great choice/pick to add to your portfolio.  With a market capitalization of close to $80Billion, no one comes close to them.  They currently are expanding their international business and are consistently increasing that beautiful dividend that us, as investors, love to see.  McDonald's, at any time, is a great way to start your dividend portfolio.  With their above 3% yield and consistent increases of over 10% to their payout, while maintaining a medium pay-out ratio, is extremely attractive.  Our waistlines may not enjoy the "Golden Arches" but our portfolio's sure do : )  Enjoy!

-Lanny B.

Disclosure: I do not recommend anything, please consult your own research. This is actual data, analysis, however I base no investor recommendation.  I am LONG MCD.  Thank you for your understanding.

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