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McDonald’s Corporation (MCD), Yum! Brands, Inc. (YUM): Is There Money to Be Made in Fast Food?

Lastly, the company pays a nice and consistently growing 2% dividend yield. At a current payout ratio below 40%, investors can be confident that the dividend will probably be raised again soon.

Should we buy Starbucks’ stock rather than just its coffee?

Starbucks Corporation (NASDAQ:SBUX), like the above two, is very well-known worldwide. The company has annual revenue of approximately $14 billion and nearly $50 billion in market capitalization. The company has had a nice run recently, sitting at a new 52-week high, leading one to ask is now the time to buy the stock?

I believe that the answer is yes. Starbucks has an immensely valuable brand name that should only grow as the BRIC countries continue to evolve. Even though the company is more expensive than the previous two from an earnings standpoint, now at a 33x trailing and 25x forward P/E, it is expected grow considerably faster. In fact, more than double McDonald’s Corporation (NYSE:MCD)’s per annum growth rate over the next five years (9%) and 50% more than Yum! (12%) as analysts’ expect an 18.5% growth rate over the same time-frame.

Therefore, the company is actually trading lower than both from a price to expected growth rate valuation, and it is seen that analysts have actually been conservative as the company has met or exceeded consensus estimates in three of the past four quarters. Operating margins came in strong at 14% while return on equity is a pretty 29%. Throw in its consistently growing 1.30% dividend yield and I think Starbucks should serve investors well over the long-term.

The Foolish conclusion

The economy continues to find it tough to get back on solid footing. Fast food restaurants have been experiencing the same dilemma. However, if investors are able to look at the long-term scenario, I believe the three stocks listed above will serve them well, while they also collect a nice dividend in the process.

Brian Gorban has no position in any stocks mentioned. The Motley Fool recommends McDonald’s and Starbucks. The Motley Fool owns shares of McDonald’s and Starbucks.

The article Is There Money to Be Made in Fast Food? originally appeared on Fool.com.

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