Jack in the Box Inc. (JACK), McDonald’s Corporation (MCD): Two Fast Food Chains to Avoid and One to Buy

While McDonald’s Corporation (NYSE:MCD) reported global same-store sales growth of 2.6% in May, the company’s first-quarter diluted earnings per share rose just 3% in constant currencies during the quarter. Also, McDonald’s Corporation (NYSE:MCD) global same-store sales fell 1% during the first three months of the year.

The shareholder rewards say it all

While financial results from quarter to quarter can be manipulated, there’s no faking the amount of cash a company returns to its shareholders. A company can’t buy back its own stock or pay dividends to shareholders unless it has the underlying financial ability to do so. And from a long-term perspective, a key criteria of truly Foolish investing, only the best companies can maintain decades-long histories of rewarding shareholders.

That’s where McDonald’s Corporation (NYSE:MCD) simply beats the field among fast-food chains. The industry giant returned $1.1 billion to shareholders during the first quarter via share repurchases and dividends. Looking further back, McDonald’s Corporation (NYSE:MCD) has a track record of rewarding shareholders that is simply hard to beat.

McDonald’s Corporation (NYSE:MCD) has increased its dividend every year since its first dividend payment in 1976. The stock yields 3.2% at recent prices.

Unfortunately for shareholders, neither Jack in the Box Inc. (NASDAQ:JACK) nor Sonic Corporation (NASDAQ:SONC) pays a dividend. In addition, both companies trade for more expensive multiples than McDonald’s. Jack in the Box and Sonic Corporation (NASDAQ:SONC) trade for 29 and 22 times trailing earnings, respectively, while McDonald’s changes hands for a much more reasonable 18x.

Not only does it carry one of the most easily recognized, most valuable brands in the world, but McDonald’s also offers investors the downside protection of strong dividend payments every year. The company trades for a more compelling valuation than its peers, and as a result, is the best fast food chain to buy today.

The article 2 Fast Food Chains to Avoid and 1 to Buy originally appeared on Fool.com is written by Robert Ciura.

Robert Ciura owns shares of McDonald’s. The Motley Fool recommends McDonald’s. The Motley Fool owns shares of McDonald’s. Robert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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