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McDonald’s cooks up a growth strategy

McDonald’s (NYSE:MCD)  is the world’s largest operator of fast-food restaurants, with more than 37,000 outlets in 120 countries. More than 44% of its outlets are in Asia, or  other emerging markets.

While best known for its hamburgers and fries, McDonald’s has an expanded menu that includes fish and chicken. It recently upgraded its offerings to include healthier and fresher foods.

mcdonalds alberta
McDonald’s increased its dividend in September (McDonald’s photo)

Performance: The stock is up 4.7% since being recommended in July, having rebounded from its March low for the year.

Recent developments: In its quarter ended June 30, revenue fell 11.5% to $5.4 billion, as the company recorded the sale of more company-owned outlets to franchisees. Global same store sales improved 4% and earnings rose 7.3%, to $1.5 billion. Per-share earnings were 11.8% higher due to fewer shares outstanding.

Dividend: In September, McDonald’s increased its quarterly dividend by 15% to $1.16 per share as of the December payment. McDonald’s has increased its dividend in each of the 42 years, since 1976 when it first began paying a dividend. The current yield is 2.8%.

Outlook: McDonald’s continues to implement a revitalization plan that is simplifying operations, reducing middle management at head office, and increasing the number of franchises.

The company expects to pay severance of up to $90 million for the head office job cuts announced in June. The cuts will help it meet a $500 million reduction in administrative expenses by the end of 2019.

McDonald’s also aims to have franchisees operate 95% of locations by the end of 2018, up from 80% in 2016. It believes that pushing down operating responsibility will help the company react more quickly to changing food tastes in its many markets.

This update on McDonald’s appeared in the Oct. 22, 2018 issue of the Internet Wealth Builder investment newsletter. It was originally recommended on July 9/18 at $159.94. Closed Oct.  26/18  at $167.49. (All figures in U.S. dollars.)

 

Adam Mayers writes about investing and personal finance. He is a contributor to the Globe & Mail’s Globe Advisor and a contributing editor to Gordon Pape's Internet Wealth Builder newsletter. Adam was Business Editor and investment columnist at The Toronto Star and is the author of six books.

1 comment on “McDonald’s cooks up a growth strategy

  1. Pingback: McDonald’s emerging market growth strategy – Adam Mayers

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