114 McDonalds Cheeseburgers, or one share of stock?
Every Friday, after school, I bring my two children to McDonalds for a cheeseburger. After their long week of learning how to add, subtract, read and write, they’ve earned a treat. Thankfully they’ve grown past the ‘happy meal” phase and no longer desire the cheap “toys” in the box. Now, they say that happy meals are for kids. This past Friday one of the children raised a question.
Who owns McDonalds?
Well, I told him, a whole lot of people own mcdonalds. You can own Mcdonald’s if you like. For the price of 114 dollar menu cheeseburgers, you can own 1 share of MCD stock. After about 25 minutes of trying to explain how publicly traded companies work, they both decided to buy 114 cheeseburgers instead of a share.
Are these two youngsters right, or should they have instead wanted to own a share of MCD?
Well, they may be right afterall. Although MCD is paying $3.56 per share in dividends (currently yielding just over 3%), the chart looks like MCD may be too expensive right now.
Looking at the chart, you can see that MCD has had quite a run lately. From around $95 last summer to its current $114. You’ll notice a strong gap up that has yet to be filled.
So, after reviewing the chart, I told the kids that we’ll stick with the cheeseburgers for now and wait to see what happens with MCD stock. I also promised them I’d buy each of them a share of the company once the price comes down a bit… maybe near $100 a share.
Now, McDonald’s has more competition than ever before. There are a multitude of fast food options today that are eating into the burger giant’s market share. With all the choices out there (which is great for consumers) MCD will have a much more difficult future ahead. Adding “healthy” options to their menu will likely not do much for the stock. Nobody goes to Mickey Dee’s for a salad… it’s those delicious fries they want.
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