If you don’t currently own, and have never owned, shares of McDonald’s Corporation (NYSE:MCD), you are probably like me and kicking yourself for not picking up a small amount of shares at least one time throughout your investing career. I always think of big names like this as being too obvious, something I might entertain when I get closer to retirement or just a good idea for if and when my dad asks for investment advice (whether or not he ever follows it). Besides, its much more fun to look for an unknown, the next Apple, something left alone and ready to triple at any moment.
All valid thoughts and again, all reasons enough to still want to kick myself for not buckling down and investing in this fast food giant. In addition to these thoughts, I have presented below two reasons why McDonald’s Corporation (NYSE:MCD) is probably a good buy at any price, but even more so after its recent fumble.
1. Dividends: I’m not attracted to dividends, you’re probably not attracted to dividends, but we all like getting paid, and in addition to shares rising the returns brought in by McDonald’s Corporation (NYSE:MCD) in the past have been magnified and are still growing because of the company’s fast rising dividend payout. Go ahead and take a look at the 4-year chart on McDonald’s Corporation (NYSE:MCD) because this is what your investment will probably do, and it is what shares have been doing since they came into existence.
On my graph I see an investment in 2009 could have been made for roughly $60 per share when a $0.50 dividend was being paid (up 24% from the $0.38 dividend paid the year before). Had you bought at that time, your shares would be up approximately 60%, you would have made an additional 18.7% in accumulated dividends and the current dividend would be yielding close to 5% on your original investment … per year, each year and growing.
2. Margins and share repurchases: McDonald’s is no AT&T Inc. (NYSE:T), which continually takes the top spot for companies with the largest buybacks, but McDonald’s Corporation (NYSE:MCD) does buy back a significant amount of shares each year. In the past four years alone, McDonald’s has bought back over $10 billion of its own shares, which does two very important things for investors. The first being increasing the ownership proportion of each share, which means they are worth more, and the second is that it allows the company to raise the dividend without having to pay out more cash each quarter. Fewer shares + same payment = more paid per share.
I specifically used AT&T Inc. (NYSE:T) earlier to now throw out a third point (more than the two I promised)–in addition to all the points above, your McDonald’s Corporation (NYSE:MCD) shares’ returns are extremely safe because unlike AT&T Inc. (NYSE:T), McDonald’s has avoided the margin compression that the telecom and a lot of other companies have been fighting. Will it come? Probably. Does it have an answer for it? Yes (raise prices). And at the current level (around 20%) I would argue that there is quite some cushion for short-mid term pressure.