McDonald’s is the world’s largest operator of fast-food restaurants, with more than 37,000 outlets in 120 countries. More than 44% are in Asia, or other emerging markets.
Apple shares tumbled last week on news of slowing iPhone sales in China and the development was seen as the canary in the coal mine.
But while Apple fell, McDonald’s shares rose 3.8 % last week 4 days to Thurs. Jan.10 and the stock is up 14.0% since its Internet Wealth Builder recommendation in July. McDonald’s was one the best U.S. stock performers of 2018, in a year when the S&P 500 index fell 4.4%.
McDonald’s has high hopes for China and it has a strong base there. The Golden Arches were China’s first taste of western fast food and the iconic brand has a lot of power and loyalty. Of course, a Big Mac meal is also a lot more affordable than an iPhone.
McDonald’s is on track to nearly double the number of restaurants in China by 2022. The company expects to have 4,500 Chinese restaurants by then, when it will surpass Japan as the chain’s second-biggest market outside the U.S. McDonald’s continues to implement a revitalization plan that aims to have franchisees operate 95% of locations. It believes franchising is the key to future profitability since owners have an incentive to react quickly to changing food tastes.
Performance: In September, McDonald’s increased its quarterly dividend for the 42nd consecutive year to $1.16 per share. It yields 2.57% at current prices. Jan 10
In its quarter ended September 30, 2018 McDonald’s reported better-than-expected results led by international markets and higher spending per customer in the U.S. where value deals brought in more traffic.
Revenue fell 7% from a year earlier, as the sales of stores to franchisees continued. Net income fell 13% the same reason, but the decline was smaller than expected. Same-store sales rose 4.2% globally, ahead of analyst expectations.
Action: McDonald’s continues to adapt and thrive. It is a buy for long term dividend and capital gains.
(This article first appeared in the Jan. 14, 2019 issue of the Internet Wealth Builder investment newsletter.)