Thursday, March 22, 2012

New Purchase - MCD

The latest addition to my portfolio is McDonald's.  This morning I decided I needed to get some egg mcmuffins to satisfy my craving.  I love those things.  While eating my breakfast I checked premarket trading and noticed MCD was down.  I put in a limit order for MCD while eating egg mcmuffins which is kind of funny now that I think about it.  Anyways I bought 13 shares which were purchased at $95.92 + commissions.  This amounts to an entry yield of about 2.9% and will pay me $36.40/year.

Everytime I go to McDonalds there are plenty of customers. Their business plan is obviously working. Even in Thailand the restaurant was busy. The burgers and fries tasted the same as in the states, it was awesome. When I was flying home from Kuwait last year I had to stay overnight at an airbase with a McDonald's. Guess what? It was packed. Everywhere I go there is a McDonald's and people are happy to pay for their food. 

I've stated this before; I've wanted to be a McDonald's stock holder for a long time.  I had many chances in 2011, but never pulled the trigger.  I consider MCD to be one the premier dividend growth stocks in the same league as PM, CVX, JNJ, PG, and KO.  In the past MCD has grown its dividend at a tremendous rate which I foresee slowing down.  I'm okay with that.

While I'm not ecstatic about the share price I paid, I feel it is reasonable.  I'd like to add to this position in the future and would welcome further price declines.


  1. Nice buy. My experience with MCD is similar to yours: Whenever I see one, there is always a line-up either at the drive-thru or inside. The business seems to be doing just fine.

    I was disappointed to read last night that their CEO, Jim Skinner, is retiring in the summer -- he has done a great job. However, his replacement, Don Thompson, seems like a capable guy.

    MCD is already one of my largest positions, but if the price continues to decline -- maybe due to fear about the CEO transition -- I might add to my position.

    1. Great buy here. I think that although MCD isn't a steal at these prices, you still paid a pretty fair price for a wonderful company. Looking at this purchase 10-20 years from now I think you'll be very happy. I bought my first load of MCD shares in the mid-$70's and added to it recently. If it continues to fall I'll add to my position like Deedubs. If it gets back above the 3% yield level, which would require a price of $93 or so, I would seriously consider adding to my position again. Long-term there are few businesses that will likely do better than McDonald's.

      Best wishes!

    2. Thanks guys. It's nice to be a shareholder of McDonald's now. Originally I was going to start a position in the 70's but ended up buying something else. This was about a year ago. Then the price took off and I was reluctant to buy.

      I'd like to increase my stake at a 3% entry yield as well, will have to wait and see what the market gives us.

  2. Great addition CI. I got in last year at the same time you're talking about with the price trading in the upper 70's. I would love to add to my position and if this dip continues I may do just that. It's a great company and with it's expansion in the international market it will most likely continue to do well.

    Another company I have my eye on if it comes back down to reasonable levels is YUM. I think with it's KFC brand it will continue to do well in with its China and India expansion. You guys have any thoughts on it???

  3. I don't typically follow YUM because I require a 2.75% or higher entry yield in my strategy. I realize I am limiting my options and could miss out on fantastic companies. However I do like to eat at Taco Bell, KFC, and Pizza Hut. I've also read KFC is doing well in China. My obsevations on Taco Bell: They are constantly coming out with new products. I remember when gorditas and chalupas were new. When I came back from deployment last year Taco Bell had new kinds of taco sauces I'd never seen before. I enjoy the green one. I like how they updated the decor in their restaurants, upgraded the beef, and have a special flavor of Mountain Dew. YUM brands are prevalent on military installations. Even when I was deployed we had a Taco Bell, KFC, and Pizza Hut (which was on the other side of the base). They had limited menus, but it was nice to be able to eat familiar foods from back home. MCD is not prevalent on Army installations. It seems the Army favors Burger King. The only McDonald's I ever saw on a military base was an airbase in Kuwait I briefly stayed at while traveling on leave or going home. As for KFC I rarely eat there but enjoy the food. I think it's too expensisive. I ate at a Pizza Hut when I was in Thailand, it was by far the nicest one I've seen. They didn't have KFC or TB.

    YUM as a stock seems to be pricey right now. My first observation is that it has a P/E of almost 26 and a yield of about 1.3%. expects about 13% long term growth in EPS. Compare to MCD with it's 18 P/E, 2.9% yield, and 10% growth. I've only spent a few minutes looking around, but to me MCD is the better value. I typically stay away from stocks with a P/E over 20 unless it's a REIT or MLP. Some of my holdings are over 20 P/E, but not when I bought them. I agree with you, it would be prudent to wait for a better price with YUM.