“Is the age of McDonald’s over?”
That was the headline of a recent Yahoo! Finance article on the fast food giant (NYSE: MCD). It lists slumping sales and a string of negative PR incidents overseas—like a tooth found in chicken McNuggets in Japan—as reasons investors should sell their MCD shares.
The article goes on to say MCD shares appear locked into a “sideways” pattern. This means share prices fail to “break out” to new highs. They stay in a narrow range as time passes. Most investors hate when stocks follow this pattern… and that is why most investors underperform the market.
Regular Daily readers know sideways patterns are an ideal setup for shareholders of elite businesses like McDonald’s. In the U.S. alone, MCD owns 50% of the fast food market. It generates almost $28 billion in revenue from over 31,000 restaurants worldwide.
In May 2014, McDonald’s president announced the company plans to return $18-20 billion to shareholders. The money comes in the form of dividends and buybacks through 2016. That’s a 10-20% increase in return of shareholder cash over the previous three years. But if you think that’s a fluke… MCD has increased its dividend payouts for 39 years in a row.
Rising dividend growth with a sideways stock pattern is an investor’s dream. Every time the company issues dividends, investors can reinvest in more shares at cheap prices. The result is a wealth-creating juggernaut over time. But the mainstream financial press never mentions that part…
If you’d like a lesson on how not to invest in McDonald’s (i.e., hopping in and out of the position), watch the three-minute clip below. Remember: When you see negative headlines surrounding a great business, take a close look at the problem.
If the issue is what Warren Buffett calls a “one-time huge, but solvable problem”… the odds are good you’ll score extraordinary returns by jumping on the opportunity.