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MacDonald’s Stock Analysis Pollie Style

Here is my first analysis on my website. Normally I just write some notes down on a little piece of paper. But since I started my blog I’m feeling obliged to share this with you. So this is my first written analysis for the company we all have visited and is a well know company.

Company (from google finance): McDonald’s Corporation franchises and operates McDonald’s restaurants in the global restaurant industry. These restaurants serve menu at various price points providing value in 119 countries globally. All restaurants are operated either by the Company or by franchisees, including conventional franchisees under franchise arrangements, and developmental licensees and foreign affiliated markets under license agreements. The Company owns the land and building or secures long-term leases for both Company-operated and conventional franchised restaurant sites. But this is nothing new. We all have eaten at the Golden Arches.

Dividend Aristocrat: MacDonald’s is paying Dividend for 38 years in a row! And is a Dividend Champion. Passed!

Dividend Yield > 2.5%: The dividend Yield of MacDonald’s is 3,2%. Of course, I like to see the dividend yield above the industry average, which is currently at 1,9%. MCD has a healthy dividend that can offer investors higher returns if they choose to reinvest it. MacDonald’s passed the second Pollie-code with colors.

Dividend payout <70%: The current dividend is $1.12 and MCD has an earnings projection of $ 2.67. The dividend payout is roughly 42%. This is way below the maximum ratio. So also passed for this point.

DGR 1 year > 0%: The dividend growth rate for 1, 3, 5 en 10 years are 8.7, 11.3, 13.9 and 22.8. This shows a healthy (expected) increase over the years. So MCD also passed the fourth Pollie-code.

P/E-ratio < 15: This is an easy metric that is well documented. It can be used as a quick metric to identify stocks that may potentially be undervalued. I use this to identify stocks that may be discounted compared to the overall stock marketThe industry average is 29.3. MacDonald’s has a current P/E ratio is 18.2. This is slightly above its own historical average (17.0). Although its higher than the Pollie-code I think this is not a problem because its far below the industry average.

EPS > 0: The EPS is 5.51 and is slightly higher that the year before. MCD has shown an increase in EPS in de last years. So MCD also passed the sixth Pollie-Code

ROE > 10%: Return on equity measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested. The current ROE is 35,5%. Another pass.

Market Cap. > 100M: No problem at this point. More than 100.000 $Mil. Another pass.

Chowder Rule > 12:Named after “Seeking Alpha” member Chowder. This is a method of identifying candidates for purchase based on a combination of yield and (5-year) dividend growth rate. When the sum of these elements is above 12%, the company presents an attractive entry point (8% for utilities). When the figure is above 8%, an existing holding is still considered worthy of being retained. The current Chowder rule is 17.1. So MCD also passed the ninth Pollie-code.

Stock price 52wk high-25%: The 52 wk high and low are: 103.78 and 92.22. This means that MCD will be in my buying zone when the stock price is below 100.89 ((103.78-92.22)*0,75 + 92.22).

Beta: I think it’s important to have low Beta stocks in my portfolio. This helps to have a stable income all the time, even when the market has a rapid decline. The Beta for MCD is 0.3.

Conclusion: When I look at the analysis, MCD passed 9 out of 10 from the Pollie-code. Wow this is a great stock. The only Pollie-code that failed is de P/E. Because this is still far below the industry average it’s not a problem. This stock is on my buy list and I may initiate a position relatively soon. What are you – the readers, thoughts on MacDonald’s? Is it a buy? Please comment on my analysis and thanks for stopping by!

Pollie.

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5 thoughts on “MacDonald’s Stock Analysis Pollie Style

  1. keithx13

    I like how you show all of your metrics for picking a stock, Pollie. I think MCD is a good company to add to your portfolio. The Chowder factor of 17 is nice, and the price has dropped below your target price. Have you purchased and shares?
    Thanks,
    KeithX13

    1. polliesdividend Post author

      Keith,

      Thanks for your post and your kind words.
      Eventually i did not purchase MCD yet. I bought T And TGT last week (see my last post)
      MCD is still on my watchlist

      Cheers,
      Pollie

  2. Dividend Life

    Hi Pollie,

    MCD passes all my criteria too. TGT is also a popular stock right now and I see you’ve already purchased some.

    Congrats on starting a blog and best wishes on your investing!
    -DL

  3. Pingback: Passive income July 2014 | Polliesdividend

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