McDonald’s isn’t the dominant growth story it was. But McDonald’s stock continues its steady performance – and a breakout may be coming.
You don’t hear much about McDonald’s (MCD) stock these days. It’s not as exciting as younger, faster-growing fast food stocks like Shake Shack (SHAK) or a recovering one like Chipotle (CMG). But McDonald’s stock continues to consistently outpace the market while remaining a reliable dividend grower.
McDonald’s Stock: Slow but Steady Growth
How consistent has McDonald’s stock been? It’s up 14% year to date, 115% in the last five years and 180% in the last decade. Now, that’s not setting the world on fire – none of those returns exceed the returns in the S&P 500 over the comparable time periods. However, when you sprinkle in the 2.3% dividend yield – much better than the 1.3% average dividend yield for the S&P 500 – the combination of reliable income and consistent returns makes MCD stock more appetizing.
And now is a good time to buy. Why? Because the company is on track for 19% sales growth and 50% earnings per share growth this year after a down 2020, and yet the stock trades at a more than palatable 24 times forward earnings – well below industry peers CMG (forward P/E of 56) and SHAK (an astronomical 169 times forward earnings), and even below slower-growth Wendy’s (WEN) (forward P/E of 25) and Yum! Brands (YUM) (forward P/E of 25.5).
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Meanwhile, MCD stock remains a Dividend Aristocrat; the company is raising its dividend yet again this November, up to $1.38 per share from the current $1.29 payout. It’s the 45th straight year the company has raised its dividend payout.
The chart looks good too, trading above its 50- and 200-day moving averages for most of the last three months, with the 50-day line trending upward since May.
It’s just down from new all-time highs above 248 last week, and the stock’s floor keeps getting bumped up – now in the low 240s, it appears. You could buy on this dip, in anticipation of the usually fruitful holiday season, starting in about a month. But for long-term investors, the entry point may not matter much. McDonald’s stock has consistently held up well in market downtrends, as it did in September, rising while the S&P 500 was down nearly 5%.
MCD Still a Long-Term Play
While it’s long past peak perception, the profit and sales growth, bullish-looking chart and rock-solid dividend continue to make MCD stock a good long-term investment for growth investors and income investors alike.
There are fast food stocks that have been growing much faster (no pun intended), but none of them offer McDonald’s combination of steady returns and yield. If you don’t already own this reliable growth and income stock, now is as good a time as any to add MCD to your portfolio.
Do you have McDonald’s stock in your portfolio? When did you buy it, and how have your returns been?
Investment analyst and Chief Analyst of Cabot Wealth Daily, Chris Preston brings you all the latest from the investing world. Sign up to get updates and breaking news delivered FREE to your inbox. Get unlimited access to our library of complimentary investing reports.Sign up now!
*This post has been updated from an original version, published in 2018.