Linked here is a detailed quantitative analysis of McDonald’s Corporation (MCD). Below are the highlights from the analysis linked above.
Company Profile: McDonald’s Corporation is the world’s largest fast food restaurant company with approximately 35,000 restaurants in 119 countries.
Fair value: When calculating fair value, we consider the NPV MMA fair value difference and these four fair value calculations. See page 2 of his linked PDF for a detailed explanation.
1. Average High Yield Price
2. 20-year DCF price
3. Average PER price
4. Graham number
MCD trades at a premium to all four valuations above. Graham’s number cannot be calculated because the tangible book value of MCD is meaningless. Also factoring in the NPV MMA differential, the stock is trading at a 38.3% premium to its calculated fair value of $190.55. MCD received no stars in this section.
Dividend analysis data: This section has 3 stars and 3 main metrics. See his two pages in the linked PDF for a detailed explanation.
1. Free cash flow payout
2. Liabilities to total capital
3. Main indicators
4. Dividend Growth Rate
5. Category year.growth
6. Rolling four-year division. > 15%
MCD received no stars in this section. The company has paid cash dividends to shareholders every year since his 1976, marking the 45th consecutive year of dividend increases.
Dividend Income vs MMA: Why take equity risk and invest in dividend stocks when you can get better returns in a much less risky money market account (MMA) or government bonds? High Yield MMATwo items are considered in this section. See his two pages in the linked PDF for a detailed explanation.
1. NPV MMA diff.
2. > Years to MMA
NPV MMA Diff. One of the $172 is below the $500 target I’m looking for in stocks with increasing dividends like MCD. If MCD increased its dividend at 6.0% per annum, it would take eight years to match MMA’s estimated 20-year average yield of 3.12%.
Peer: The company’s peer group includes: Hmmm!Brands Co., Ltd. (YUM) Yield 1.8%, Starbucks Co., Ltd. (SBUX) with a yield of 2.1% Wendy’s Company (WEN) yields 2.2%.
Conclusion: MCD received no stars in the Fair Value section, no stars in the Dividend Analysis Data section, no stars in the Dividend Income vs. MMA section, and a total of 0 stars. This quantitatively ranks the MCDs. Avoid 0 stars stock.
my use D4L-PreScreen.xls We determined that the stock needs to fall to $205.80 before MCD’s NPV MMA differential rises to $500. At that price, the stock yields 2.8%.
reset the D4L-PreScreen.xls Using the model to solve for the dividend growth rate required to generate the target $500 NPV MMA differential, the calculated rate is 8.4%. This dividend growth rate is higher than the 6.0% used in this analysis, so there is no margin of safety. For MCDs Risk assessment 1.75 classified as medium risk stocks.
MCD has become the dominant brand in the increasingly demanding global fast food industry. The company enjoys unmatched scale advantages and international growth opportunities. After years of significant price increases, MCD has become one of the largest positions in my dividend growth portfolio. In 2016, the position he returned to 5%. The MCD is trading above my calculated fair value of $190.55, with debt to total capital and free cash flow payments exceeding my maximum. For now, we will wait for a better time before adding positions.
Disclaimer: The material presented here is for informational purposes only. The above quantitative analysis of stocks, including star ratings, is calculated mechanically and is based on historical information. This analysis assumes that stocks will perform as well in the future as they have in the past. This is generally not true.before buying or selling stocks you You should do your own research and come to your own conclusions. See our disclaimer for more information.
Full Disclosure: At the time of writing this article, I have long held MCD (6.9% of the dividend growth portfolio).
Related article:
– Southern Company (SO) Dividend Stock Analysis
Tags: MCD, YUM, SBUX, WEN,