McDonald's: Still a Happy Meal for investors
Getting the menu wrong one spring season isn't likely to stop this juggernaut.
In a word, no. More emphatically, not by a long shot. Somehow, I think individual investors got the idea that successful investing is exciting. I think a lot of successful investing should be as exciting as watching paint dry.
For instance, without much fanfare McDonald's has raised its dividend over the last decade from $0.24 per share to today's annualized rate of $2.80, an increase of more than tenfold. What in this world grows 28% annually?
Likewise, if you purchased McDonald’s shares at about $27 a decade ago, they have also, without too much fanfare, risen to about $100 -- a triple -- before settling at today's price. So, in the face of a 300% gain in 10 years, I question the reasoning of investors who assign so much meaning to a two-month performance.
And let's not forget, investors who have hung in for the past decade have a yield of 10% ($2.80/$27) and presumably rising. That means if McDonald's shares never rise another $1 and McDonald's continues to pay its dividend, that 10% annual return will beat the historical average of the S&P 500 year in and year out, even if the stock loses 50% of its value. How many professional money managers can match this performance?
Perhaps the most important disclaimer in the investment field is that past returns do not guarantee future results, and bullish as I am about McDonald's, this is an idea that needs to seriously considered.
In my mind however, this risk is largely ameliorated by the fact that the same management team that delivered such spectacular results over the last decade is largely in place. Moreover, global economic trends favor the budget friendly product that McDonald's offers at its installed base of 33,000 restaurants serving 68 million people in nearly 120 countries. Every day.
I'm hard-pressed to believe that getting the menu wrong one spring season is going to stop this juggernaut. If you think it will, I hope you will sell your shares because I'm a buyer.
More from Minyanville
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
Shares of DVR pioneer TiVo are up 40 percent over the past two years, but unlike the industry giants, there's still plenty of room to run with this pay-TV play.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.