McDonald's (MCD) 2013 Review

McDonald’s operates, franchises or licenses more than 34,500 fast food restaurants world wide.  Over the past ten years, the company has grown profits at a 14% pace but dividends at 27% annualized while earning a 25%+ return on equity.  Looking forward, the pace of advance of dividends should slow somewhat although earnings growth is expected to continue at an above average pace as a result of:

(1) global growth not only in the number of restaurants but also in same store sales,

(2) introduction of new higher margin products [McCafe Real Fruit Smoothies, Frappes, Angus snack wraps],

 

(3) a revitalization program aimed at increasing market share via rising restaurant visits, growing brand loyalty and a new marketing campaign,

Negatives:

(1) rising commodity prices and wage costs,

(2) intense competition,

(3) the potential impact on sales of continuing economic malaise.

MCD is rated A++ by Value Line, carries a 46% debt to equity ratio, has an ongoing stock repurchase program and its stock yields 3.0%.

Statistical Summary

                 Stock      Dividend         Payout      # Increases  

                Yield      Growth Rate     Ratio       Since 2003

MCD         3.0%           10%              55%             10

Ind Ave      2.3*             9*                42               NA  

                  Debt/                        EPS Down       Net        Value Line

                  Equity         ROE      Since 2003      Margin       Rating

MCD         46%             42%            0                 21           A++

Ind Ave      44                25             NA                9           NA

    

*over 50% of the companies in this industry don’t pay a dividend

     Chart

            Note: MCD made great progress off its October 2008 low, quickly surpassing the downtrend off its August 2008 high (straight red line).  Long term, the stock is in an uptrend (blue lines).  Intermediate term, it is in an uptrend (purple lines).  The wiggly red line is the 50 day moving average.  The Dividend Growth and Aggressive Growth Portfolios own a 50% position in MCD, having Sold Half in early 2012.  The upper boundary of its Buy Value Range is $63; the lower boundary of its Sell Half Range is $99.

   

http://finance.yahoo.com/q?s=MCD

9/13