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McDonald's (MCD): Dividend Idea of the Week - A Restaurant Leader with 3.55% Yield and 7.64% Upside Potential
Posted by: Dividend (IP Logged)
Date: October 29, 2012 09:19AM

Our dividend idea of the week is the leading restaurant operator and franchise company McDonald's (MCD).

McDonald's owns and franchises its restaurants all over the world. By the end of 2011, the company had 33,510 restaurants in 119 countries, more than 27,000 of which were operated by franchisees and 6,435 were operated by the company. MCD operates a proven business model with a well diversified global structure. The company is a strong established Dividend Champion and raised dividends over a period of 36 consecutive years with a double-digit long-term growth rate. Morningstar estimates the fair value of the company at $94, which represents an upside potential of 7.64% compared to the previous close price of $87.33.

We like the strong brand and consumer focus of McDonald's. The huge cash flow of $7.1 billion allowed the company to pay $2.6 billion in dividends and to repurchase $3 billion of its own shares as of fiscal year 2011. Roughly $2.7 billion were used for capital expenditure.

Here is a short biography of the stock:

McDonald's (MCD) has a market capitalization of $87.44 billion. The company employs 420,000 people, generates a revenue of $27 billion and has a net income of $5.5 billion. The firm's earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $9.8 billion. The EBITDA margin is 36.16 percent (the operating margin is 31.58 percent and the net profit margin 20.38 percent).

Financial Analysis: The total debt represents 37.89 percent of the company's assets and the total debt in relation to the equity amounts to 86.87 percent. Due to the financial situation, a return on equity of 37.92 percent was realized. Twelve trailing months earnings per share reached a value of $5.31. Last fiscal year, the company paid $2.53 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 16.33, the P/S ratio is 3.26 and the P/B ratio is 6.2. The dividend yield is 3.53 percent. The beta ratio is 0.41.

Darden Restaurants (DRI) has a market capitalization of $6.76 billion. The company generates a revenue of $8 billion and has a net income of $476 million. The firm's EBITDA amounts to $1.1 billion. The EBITDA margin is 13.6 percent (the operating margin is 7.98 percent and the net profit margin 5.96 percent).

The total debt represents 35.68 percent of the company's assets and the total debt in relation to the equity amounts to 115.13 percent. Last fiscal year, a return on equity o f25.22 percent was realized. Twelve trailing months earnings per share reached a value of $3.66. Last fiscal year, the company paid $1.72 in the form of dividends to shareholders.

Here are the price ratios of the company: The P/E ratio is 14.36, the P/S ratio is 0.85 and the P/B ratio 3.69. The dividend yield is 3.8 percent. The beta ratio is 0.86.

Dunkin Brands (DNKN) has a market capitalization of $3.73 billion. The company generates a revenue of $628.2 million and has a net income of $34.44 million. The firm's EBITDA amounts to $207.33 million. The EBITDA margin is 33 percent (the operating margin is 27.23 percent and the net profit margin is 5.48 percent).

The total debt represents 45.7 percent of the company's assets and the total debt in relation to the equity amounts to 197.53 percent. Last fiscal year, a return on equity of 6.55 percent was realized. Twelve trailing months earnings per share reached a value of $0.72. Last fiscal year, the company paid no dividends to shareholders.

Here are the price ratios of the company: The P/E ratio is 43.04, the P/S ratio is 5.27 and the P/B ratio is 5.05. The dividend yield is 1.91 percent. The beta ratio is not calculable.

Yum! Brands (YUM) has a market capitalization of $31.58 billion. The company generates revenue of $12.63 billion and has a net income of $1.34 billion. The firm's EBITDA amounts to $2.39 billion. The EBITDA margin is 18.95 percent (the operating margin is 14.38 percent and the net profit margin 10.57 percent).

The total debt represents 37.55 percent of the company's assets and the total debt in relation to the equity amounts to 181.95 percent. Last fiscal year, a return on equity of 77.61 percent was realized. Twelve trailing months earnings per share reached a value of $3.40. Last fiscal year, the company paid $1.07 in the form of dividends to shareholders.

Here are the price ratios of the company: The P/E ratio is 20.58, the P/S ratio is 2.51 and the P/B ratio is 17.71. The dividend yield is 1.91 percent. The beta ratio is 0.88.

Tim Hortons (THI) has a market capitalization of $7.7 billion. The company generates revenue of $2.87 billion and has a net income of $387.76 million. The firm's EBITDA amounts to $674.5 million. The EBITDA margin is 23.52 percent (the operating margin is 19.96 percent and the net profit margin is 13.52 percent).

The total debt represents 23.44 percent of the company's assets and the total debt in relation to the equity amounts to 44.83 percent. Last fiscal year, a return on equity of 29.57 percent was realized. Twelve trailing months earnings per share reached a value of $2.56. Last fiscal year, the company paid $0.68 in the form of dividends to shareholders.

Here are the price ratios of the company: The P/E ratio is 19.40, P/S ratio is 2.69 and the P/B ratio is 6.78. The dividend yield is 1.71 percent. The beta ratio is 0.71.

Starbucks (SBUX) has a market capitalization of $34.86 billion. The company generates revenue of $11.7 billion and has a net income of $1.25 billion. The firm's EBITDA amounts to $2.1 billion. The EBITDA margin is 17.76 percent (the operating margin is 14.77 percent and the net profit margin is 10.67 percent).

The total debt represents 7.47 percent of the company's assets and the total debt in relation to the equity amounts to 12.53 percent. Last fiscal year, a return on equity of 30.91 percent was realized. Twelve trailing months earnings per share reached a value of $1.79. Last fiscal year, the company paid $0.56 in the form of dividends to shareholders.

Here are the price ratios of the company: The P/E ratio is 25.58, P/S ratio is 3 and the P/B ratio 7.86. The dividend yield is 1.47 percent. The beta ratio is 1.23.

Burger King World (BKW) has a market capitalization of $5.23 billion. The company generates revenue of $2.1 billion and has a net income of $84.6 million. The firm's EBITDA amounts to $335.6 million. The EBITDA margin is 16.17 percent (the operating margin is 16.17 percent and the net profit margin is 4.08 percent).

Linked is our full Dividend Idea (McDonald's) as a free PDF report.

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* I am long in MCD and DRI shares. I receive no compensation to write about these specific stocks, sector or theme. I don't plan to increase or decrease positions or obligations within the next 72 hours.

I have no positions in the rest of the stocks mentioned, and no plans to initiate any positions within the next 72 hours. I receive no compensation to write about any specific stock, sector or theme.

The stock analysis, including the rating and up/down potential, is based on historical information and provided by several data provider like Thomson Reuters, Morningstar, Google Finance, Yahoo! Finance and MSN. The analysis assumes the stock will perform in the future as it has in the past. This is generally never true. Material presented here is for informational purposes only. Before buying or selling a security, you should do your own research and reach your own conclusion.


Stocks Discussed: DNKN, DRI, MCD, BKW, SBUX, THI, YUM,
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