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Is McDonald's Getting Back Into The Buy Zone?

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Sure Dividend


  • McDonald's re-franchising activities are paying off.
  • McDonald's is poised to grow further, thanks to strong comps and new measures such as McDelivery.
  • Investors get an attractive dividend and potential for solid total returns.

By the Sure Dividend staff

McDonald's (NYSE:MCD) is one of the Dividend Aristocrats, a group of stocks in the S&P 500 that have their dividends for at least 25 years in a row. This has made the company a well-followed dividend growth stock over many decades. You can see all 53 Dividend Aristocrats here.

McDonald's growth has accelerated over the last couple of quarters, and it continues to return a lot of cash to shareholders. Recently, the valuation has come down as well.

At this price, McDonald's valuation is getting more attractive, while investors will also benefit from a solid 2.6% dividend yield.

Company Overview And Growth Outlook

McDonald's is, in terms of total market capitalization, the biggest restaurant company in the world. The company, which was founded more than 70 years ago, has grown into a company with operations in more than 100 countries.


MCD Total Return Price data by YCharts

Since the beginning of the current century, McDonald's total returns have trounced the broad market's total returns, as investors have seen a 10.4% annual gain. This is despite the huge bear markets we have seen over that time frame after the dot.com bubble burst and during the last financial crisis.

Over the last couple of years, McDonald's has undergone big changes. Management found that it would be beneficial for the company to re-franchise the majority of its restaurants. This strategic shift had a big impact on McDonald's results:


MCD Revenue (TTM) data by YCharts

Revenues are down substantially over the last three years, but at the same time, operating earnings jumped up significantly. When we take a closer look at the re-franchising activities, it becomes clear why that happened: McDonald's used to recognize all of the sales at restaurants the company owned as revenues, but that is not true any longer. As many of those

High-quality Dividend Aristocrats like McDonald's are excellent long-term holdings for dividend growth. Buying them when they are undervalued, can provide even better returns over time. This is why we started our marketplace service Undervalued Aristocrats, where we perform in-depth valuation analysis on all the Dividend Aristocrats and Dividend Champions, which are stocks with 25+ consecutive years of dividend increases. See our full list of recommendations with our service Undervalued Aristocrats, which provides actionable buy and sell recommendations on some of the most undervalued dividend growth stocks around. Click here to learn more.

This article was written by

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Sure Dividend helps individual investors find high quality dividend growth stocks with strong competitive advantages suitable for long-term holding. The authors who write for Sure Dividend on Seeking Alpha are as follows:Bob CiuraBen ReynoldsJosh Arnold

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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