- McDonald's stock currently offers a dividend yield of over 3%.
- Solid Fundamentals, huge cashflows and a strong management team will hold the company in good stead over the coming quarters.
- All-day breakfast should start to have a positive impact on the financials from the coming quarter onwards.
- The McDonald's stock looks set to rise higher in 2016, helped in part by a $20 billion buyback program.
McDonald's (NYSE:MCD) reported a strong Q3 2015 earnings report. The company reported a growth in US same store sales for the first time in the last 7 years. Even as currency headwinds pressured the topline, the company did beat consensus earnings by a solid 12 cents after reporting Q3 EPS of $1.4 per share. The recent financial success has also been rewarded with a more than 25% rise in McDonald's stock rice.
All Day Breakfast Could Drive Meaningful Growth
The strong performance of the McDonald's stock, that too in a turbulent current market, has a lot to do with recent moves the company has made to change the consumer opinion of the brand. The company also launched the all-day breakfast menu, although in a limited form, which could turn out to be a significant driver of topline growth in Q4, given its first 3 full months of being in operation.
Stephen Easterbrook, the new CEO has hit the nail on its head, even though he hasn’t gotten enough credit for All-Day breakfast and cleaning up McDonald’s reputation. A few months ago, McDonald’s shut down a few stores for the first time in over 4 decades, and refranchised over 3,000 stores globally, which could save the company upto $300 million. While store closures isn't an ideal measure, these ACTIONS were necessary in order to optimize global operations, and Stephen Easterbrook is very adamant about declaring the progress and positive expectations in Q4 and onward through 2016.
Excellent Fundamentals Support McDonald's Stock
McDonald's stock currently offers an attractive dividend yield of over 3%. As if that weren't enough, the company's financials continue to look solid with a strong balance sheet and a respectable free cash flow. The earnings growth will also be aided by a $20 billion share buyback program to be executed throughout 2016, and a capital return program worth $9 billion executed in 2015.
While the company definitely sports strong financials, a 3%+ dividend yield alone could attract long term income investors in large numbers. Add to these the recent launch of all-Day breakfast, McDonald's improved results on a global scale under a strong new management and it becomes clear why McDonald's stock looks such an attractive long play for 2016.