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Forget Growth, Buy McDonald's (MCD) Stock for the Dividend
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It’s been just over a week since McDonald’s (MCD - Free Report) reported its Q2 earnings, and the results were disappointing. The company missed revenues expectations across the board, and global comparable sales increased by a meek 3.1%. Total sales were down by over $230 million compared to the same quarter last year, and McDonald’s ability to hold onto its market share in the fast food space has come under increased scrutiny.
The company has attempted to bolster sales growth by having an expanded all day breakfast menu and introducing its “Pick 2 for $5” promotion, but these methods have been scrutinized for leading to hampered sales growth since many customers are spending less at McDonald’s restaurants. Peers in the fast food space growing more competitive, and they are resorting to fighting for consumer dollars through many creative ways. While all this is happening, McDonald’s is struggling to hold onto its strong footing in the industry.
There is still a bright spot for investors though. McDonald’s is still McDonald’s, and this company is not about to blink out of existence anytime soon. That being said, MCD stock looks pretty attractive from an income standpoint. The company has been growing its dividend payout per share every year for decades, and it should have the ability to grow its dividend significantly in the years to come since it consistently produces a high level of free cash flows. McDonald’s is currently paying a quarterly $0.89 dividend, and this amounts to $3.56 given to investors every year for each share they own. At the current share price, this amounts to a yield of about 3.03%.
If you bought shares in early August of 2010, you would currently be collecting an annual dividend yield of about 5%, and since that year, the annual cash payout has grown by 52.2%. Now, McDonald’s performance has contracted relative to 2013 revenue numbers, but they are still churning out a high level of sales, and it is reasonable to assume that they will continue to do so for a long time.
The fourth quarterly payout of $0.89 is scheduled to be paid on the 16th of September. After this, the company should raise its quarterly dividend once again if it follows through with its decades-old practice of raising its payout annually. When this happens, the yield per share will increase relative to the stock’s current share price.
Bottom Line
MCD shares could stand to lose some weight over the short term, but the stock definitely makes for an intriguing income play if you’re set on holding onto this over the long run. The company is looking to make some sort of turnaround with regards to making its food inputs healthier. Hopefully this will translate into better sentiment among customers as the company moves forward. McDonald’s stock is currently a Zacks Rank #3 (Hold). Pay attention to movements in the rank so that you can better gauge an ideal time to pick up shares.
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Forget Growth, Buy McDonald's (MCD) Stock for the Dividend
It’s been just over a week since McDonald’s (MCD - Free Report) reported its Q2 earnings, and the results were disappointing. The company missed revenues expectations across the board, and global comparable sales increased by a meek 3.1%. Total sales were down by over $230 million compared to the same quarter last year, and McDonald’s ability to hold onto its market share in the fast food space has come under increased scrutiny.
The company has attempted to bolster sales growth by having an expanded all day breakfast menu and introducing its “Pick 2 for $5” promotion, but these methods have been scrutinized for leading to hampered sales growth since many customers are spending less at McDonald’s restaurants. Peers in the fast food space growing more competitive, and they are resorting to fighting for consumer dollars through many creative ways. While all this is happening, McDonald’s is struggling to hold onto its strong footing in the industry.
There is still a bright spot for investors though. McDonald’s is still McDonald’s, and this company is not about to blink out of existence anytime soon. That being said, MCD stock looks pretty attractive from an income standpoint. The company has been growing its dividend payout per share every year for decades, and it should have the ability to grow its dividend significantly in the years to come since it consistently produces a high level of free cash flows. McDonald’s is currently paying a quarterly $0.89 dividend, and this amounts to $3.56 given to investors every year for each share they own. At the current share price, this amounts to a yield of about 3.03%.
If you bought shares in early August of 2010, you would currently be collecting an annual dividend yield of about 5%, and since that year, the annual cash payout has grown by 52.2%. Now, McDonald’s performance has contracted relative to 2013 revenue numbers, but they are still churning out a high level of sales, and it is reasonable to assume that they will continue to do so for a long time.
The fourth quarterly payout of $0.89 is scheduled to be paid on the 16th of September. After this, the company should raise its quarterly dividend once again if it follows through with its decades-old practice of raising its payout annually. When this happens, the yield per share will increase relative to the stock’s current share price.
Bottom Line
MCD shares could stand to lose some weight over the short term, but the stock definitely makes for an intriguing income play if you’re set on holding onto this over the long run. The company is looking to make some sort of turnaround with regards to making its food inputs healthier. Hopefully this will translate into better sentiment among customers as the company moves forward. McDonald’s stock is currently a Zacks Rank #3 (Hold). Pay attention to movements in the rank so that you can better gauge an ideal time to pick up shares.
The Zacks Rank is a truly marvelous trading tool. Our ranking system has beaten the S&P 500, yielding an average return of 25% per year for the last 29 years! Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>