McDonald’s Raised The Dividend Again, But It’s Overvalued

McDonald’s Corporation (MCD) raised the quarterly dividend by about 8% to $1.25 per share giving an annual payout of $5.00. The forward dividend yield is ~2.4% above the broader market average. This stock continues to be a favorite for many small investors due to the company’s status as a Dividend Aristocrat and trailing returns. The company has raised the dividend now for 43 consecutive years and will likely achieve Dividend King status in seven years joining that exclusive club. A past investment in McDonald’s has proven to be a good one. In the past 10-years the stock has generated average annual total returns of 17.6% with dividends reinvested and 15.8% without dividend reinvested. Both of these numbers trounce the S&P 500’s returns over the same time period as seen in the chart below. I like McDonald’s. The business model is simple, and they sell a lot of burgers, breakfast, soda, and coffee. But with the large increase in total debt and current high valuation multiple future returns may be more muted. Hence, I am staying on the sidelines for now.

Please click here to read the complete article on my profile at Seeking Alpha.

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