CA - McDonald's High Dividend Yield Meets High Food Price Inflation

2024-06-17 15:09:40 ET

Summary

• MCD now features a dividend yield that's near peak levels in at least 5 years, indicating attractive valuation.
• But on the negative side, I am seeing high food price inflation as a key profit headwind.
• It is impacting both consumer spending and MCD's menu prices, both could decrease customer flow.
• Valuation is not cheap either when growth outlook is factored in.

MCD stock: dividend yields near peak levels in at least 5 years

McDonald’s ( MCD ) caught my attention in my screening of dividend stocks. In these screens, I look for dividend stocks whose yields are noticeably above or below their historical averages. More specifically, the chart below shows MCD's dividend yield compared to its historical average in the past 5 years. As you can see, McDonald's current dividend yield of 2.58% is significantly above its 5-year historical average of 2.23%. Moreover, the current yield is also among the highest levels in at least 5 years. The only exception is the period right after the COVID-19 breakout, when the stock (together with the broader market) went through a fire sale....

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