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Give McDonald’s a break

By OliverPursche ·
Tuesday, May 22, 2012
Posted: 9 am ET

Sometimes I think investors are just plain silly. After reporting a stellar first quarter on April 20 and lifting the market overall, McDonald’s is now on the ropes with investors. It seems April sales failed to meet management’s sales forecast for the month, and this little bit of bad news has investors running for the door.

This annoys me to no end, except for one salient fact: I can buy more McDonald's stock at a discount, courtesy of investors who sold off at the first hint of trouble. To me, one month does not overshadow the tremendous management team who have raised their dividends nine years in a row. This includes years where movies like "Super Size Me" came out, along with the subsequent pullback in the market overall from a national economy in free fall. I counsel investors to think a little bit longer than one month of sales. Here’s why: In 2002, the McDonald’s dividend was 24 cents a share . Today, it’s indicating $2.80, a tenfold increase, or compound annual growth of nearly 28 percent.

If you look a little more deeply into the numbers, they are even more compelling. For instance, if you purchased stock in the company in January 2002, at $27.75, you now have a 10 percent yield. If you purchased in January 2003, your shares are yielding 19.4 percent. All of this is good news and doesn’t even take into account the growth in share price, which is now trading north of $90 a share.

Now, knowing that the past does not guarantee the future (I recall a Mr. Buffett speaking about how if that were the case, librarians would be millionaires), the team that delivered this spectacular performance is still in the trenches, still tinkering, refining and improving. We own McDonald's. It’s has been good to us and our investors, and we suspect now that it is on sale, we may do even better with the company moving forward.

Here are the GMG Defensive Beta Fund’s disclosures.

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