McDonald's: The Big McPullback Is A Chance To Buy This Upcoming 'Dividend King'

Core Viewpoint - The recent decline in McDonald's stock presents a buying opportunity for both long-term and short-term investors, as the stock has retraced to a significant support level that previously marked a bottom [2][3]. Stock Performance and Technical Analysis - McDonald's stock reached a low of approximately $245 per share in October 2023, rallied to over $300 in early 2024, and has since returned to around $246, indicating a potential bullish double-bottom formation [3]. - The $245 level is seen as a strong support point, suggesting that the stock may rebound from this level again [3]. Reasons for Recent Pullback - The stock's recent decline may be attributed to profit-taking after reaching over $300, as well as a slight earnings miss in Q1 2024, where non-GAAP earnings per share were $2.70, missing the consensus estimate of $2.73 [4]. - Broader economic concerns, such as pressures on lower-end consumers and rising auto loan delinquencies, have also contributed to the stock's weakness [4]. Dividend Status - McDonald's is currently a "Dividend Aristocrat," having raised its dividend for 48 consecutive years, and is on track to become a "Dividend King" by raising its dividend for 50 years [5]. - The most recent dividend increase was from $1.52 to $1.67 per share, with a current yield of nearly 3% [5][9]. Growth Drivers and Catalysts - Menu innovation, such as the introduction of a $5 meal deal, is expected to attract more customers and enhance traffic [6]. - A potential decline in the U.S. dollar could benefit McDonald's, as approximately 59% of its revenues come from international markets [6]. - The launch of the CosMc's concept, which offers specialty drinks and snacks, may provide additional growth opportunities [6]. - McDonald's is positioned to benefit from advancements in AI and automation, which could significantly reduce labor costs in the future [6]. Earnings Estimates and Financial Health - Analysts project earnings per share growth, with estimates of $12.20 for 2024, $13.25 for 2025, and $14.36 for 2026, reflecting year-over-year increases [8]. - The company has approximately $51 billion in debt and about $838 million in cash, indicating a substantial financial position [8]. Share Buybacks - In Q1 2024, McDonald's repurchased approximately $918 million worth of its shares, consistent with its historical practice of stock buybacks [9].