McDonald’s is a business who earns revenue through company-owned restaurants, franchise royalties, and licensing pacts. As of March 2012, there were 33,500 locations in 119 countries.
MCD’s current 10 year dividend growth rate is 21.09%!
Any investor, who’s main goal is to preserve capital, should seek, in all his or her investments, a significant difference between the current value of a business and the price in which the business can be bought. This insures protection in case of an unfavorable event and to maximize the investment return if the analysis is confirmed.
In the words of his disciple, Warren Buffett: “Never depend on a good sale. Get a purchase price so attractive that even a mediocre sale will produce good results.
Although given the title of “Dividend King” we must be vigilant in maintaining price discipline. We typically purchase operating companies at 8-10 times Cash Flow. However, a stock like this warrants special attention due to its size and dominance of their market. Chances are no other company will be able to purchase this behemoth of a company, therefore we will put a value on the business of 30 times Cash Flow.
Conclusion & Valuation
MCD has consistent debt, strong cash flow, and consistent rising dividends! Imagine getting a pay raise of 21.09% every year!!
I am buying up to $63.75 and not a penny more!