Thursday, January 20, 2011

McDonald's (NYSE:MCD) Valuations Remain Attractive, Dividend Better Than Bonds

McDonald's (NYSE:MCD) is seen as an excellent way to acquire a solid multi-national, and their 3.3 percent dividend yield could be considered a better place to put money in contrast to bonds.

Canaccord says, "Credit Suisse named McDonald’s its top pick, raised its earnings expectations for 2011, and also added McDonald’s to the U.S. Focus List. They see an excellent opportunity to purchase a stable multi-national at attractive valuations when near-term expectations have come down. Additionally, the 3.3% dividend yield could potentially be seen as being better than a bond in a low-rate environment. With an increase in the discretionary spending forecast, Credit Suisse expects restaurant sales to increase by 4% in 2011 Specifically, the brokerage predicts that McDonald’s will likely benefit the recently passed payroll tax cut, which offers the biggest percentage boost to discretionary spending for low-middle income earners. Further, Credit Suisse economists are increasingly bullish on job recovery, notable for the restaurant as people are more likely to eat out for breakfast if they are on their way to work. Favorable FX appreciations in the EUR, GBP, CAD and AUD could also benefit the restaurant, providing a tailwind for earnings. McDonald’s reports its Q4/10 results on January 24, providing an opportunity for management to address growth opportunities and inflation. Credit Suisse analysts believe results will be in line with expectations and that the recent FX movements will provide an upwards bias to post-earnings estimate revisions."

McDonald's was trading at $75.14, down $0.21, or 0.28 percent, as of 1:58 PM EST.

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