McDonald's: Dividends Are Only Part Of The Growth Story

| About: McDonald's Corporation (MCD)
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McDonald's (NYSE:MCD) is a company that continues to do exceptionally well. This has been a favorite stock of mine for quite some time now. McDonald's is one of those companies that can give you appreciation as well as provide a nice income stream. McDonald's currently has a dividend yield of 2.9%.

The company continues to execute its plan which is doing extraordinarily well in this difficult environment. McDonald's operating plan is to focus on the 5 Ps, which are people, products, place, price and promotion. Year-to-date operating income for the company is up 9% and earnings per share grew 10% both in constant currencies. In this same period two years ago, McDonald's was serving 58 million customers a day, today McDonald's is serving 64 million customers a day around the world.

I like McDonald's future growth prospects, this is a very important element in any dividend paying stock. You want to make sure that the business will be able to maintain its dividend during all phases of the economy, even during tough times like the current economy.

Here are more highlights I like about the McDonald's story:

- McDonald's is the largest player in a fragmented market. In the company's top 7 markets alone, the quick-service restaurant category is worth $420 billion with McDonald's having only 14% of that market share. This definitely gives McDonald's room to increase its business.

- Growth in the fast food industry has been relatively flat the last few years. Even if growth were to resume at 5% annually, McDonald's would be in a strong position to capture a large part of that growth.

- McDonald's is continuing its restaurant reimaging plan. This is a great driver for sales growth. Some of its most successful locations have seen double digit revenue increases .

- I expect to see beverages continue to be a big growth driver for the business going forward. The company has benefited from its line of McCafé drinks which have been a big success. This will continue to drive growth as it expands the McCafé line internationally. Another great development was the launch of the smoothie line in the United States. Smoothies added to the company's specialty beverage lineup, which increased total McCafé beverage sales by 16% in the most recent quarter compared to last year.

I'm bullish on McDonald's and view pullbacks as opportunities to buy. I expect the company to continue to benefit from same store sales growth due to its reimaging program. McDonald's should also see its revenue increase as it expands the McCafé line internationally.

Disclosure: I am long MCD.