SBUX Vs. MCD: Higher Growth Is Now Also Higher Yielding

Summary

  • Over the past decade in which Starbucks more than doubled its revenues, while McDonalds's revenues declined, the two stocks delivered similar total returns.
  • This was best explained by Starbucks's yield being too low 10 years ago, with too much of a growth expectation priced in relative to McDonald's.
  • Now that Starbucks's dividend yield has crossed above that of McDonald's, I see the former as a better buy given better greater profitability and growth runway.
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Starbucks sign

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One of the first major announcements made by Howard Schultz on his return to the helm of Starbucks Corp. (NASDAQ:SBUX) was a halt to stock buybacks. Remembering how McDonald's Corp. (

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This article was written by

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Tariq Dennison, runs an RIA focused on international clients and portfolios, applying his on-the-ground experience as an expat investing in diverse foreign markets. Tariq is the author of the books "Invest Outside the Box" and "10 Ways To Invest." He lives in Switzerland, and has worked in Finland, Canada, the UK, Hong Kong, and Singapore.

Tariq is the leader of the investing group

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Analyst’s Disclosure:I/we have a beneficial long position in the shares of SBUX, MCD either through stock ownership, options, or other derivatives. 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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