Determining whether McDonald’s Corporation (NYSE: MCD) would make a wise addition to an investment portfolio requires evaluation of multiple factors like fundamental analysis and consumer sentiment. A number of techniques exist for conducting an analysis, and no single method can yield absolutely certain predictions about the future of a stock’s performance, so decisions can only be made with the general consensus and most likely expectations in mind.
Fundamentally, MCD is a strong “hold” at best, as the stock has not performed at levels great enough to warrant a “buy” rating. Over the past three years, the company’s market capitalization decreased from $96.7 billion as of November 15, 2011 to $92.9 billion as of November 13, 2014, meaning McDonald’s as a whole is actually worth less today than it was three years ago. Similarly, the company’s net income also decreased from $5.5 billion for the trailing 12 months in December 2011 to $5.06 billion for the 12 months ending in September 2014. However, MCD’s total cash and equivalents has increased from $2.34 billion at the end of 2011 to $2.83 billion as of the end of September. The cash increase correlates with steady dividend growth of $2.53 per share in 2011 to $3.12 per share in 2013, with the company on pace to pay out a total of $3.40 per share this year.
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Despite MCD’s disappointing third-quarter results, analyst consensus is for long-term investors to hold the stock. Recent issues involving health and safety concerns in places like China and Russia, as well as wage protests across the U.S., will eventually be rectified through legislation or changes in operating procedure. Furthermore, the company’s household-name status and constantly-evolving ad campaigns will continue to bring steady droves of customers to restaurant locations throughout the world. McDonald’s has become an iconic brand across the globe, and it’s extremely unlikely that such a massive and experienced corporation will crumble any time in the near future. For these reasons, I would disregard the scandals and negative consumer sentiment and instead focus on the long-term fundamentals of the stock, which indicate that MCD is a solid choice, especially for investors looking for consistent and predictable dividend income.
