Today I bought shares of McDonald's (MCD), one of the largest restaurant companies in the world, with over 33,000 restaurants serving about 68 million people per day in 119 countries. It is a well-known brand with its signature Golden Arches and popular menu items that include Big Macs, Quarter Pounders, Chicken McNuggets, Filet-O-Fish sandwiches, and their classic French Fries, as well as a variety of beverage, dessert, and breakfast selections.
I think McDonald's is a stable, well-run company with good long-term prospects. MCD also happens to be a great dividend growth stock. The company has increased its dividend for 35 consecutive years -- every year since initiating its dividend payout in 1976. It has a 5-year dividend growth rate of 20.4% and the most recent increase (in December 2011) was 14.8%.
The stock's price decreased by more than 2% today after the company reported April sales that were lower than analysts' expectations. However, it is worth noting that the company's monthly sales still grew by over 3% worldwide and its year-to-date sales growth is higher than for the corresponding period in 2011. I don't pay much attention to technicals, but I did notice that today's dip moved the stock's price below its 200-day moving average to a 5-month low. On a fundamental basis, it put MCD in what I consider to be fair-value territory with a P/E of about 17.5 (previously, I felt the stock was a bit overvalued). I decided to take advantage of this price decline and increase my position in this excellent company.
I bought 15 shares of MCD at the price of $93.46 per share. Given that I had capital appreciation on my existing position, I was not able to average down, but that's okay. I now have a total of 50 shares at an average price of $88.84 per share, giving me a 3.15% yield on cost. At the current dividend rate, I can expect to receive quarterly dividends from MCD of $35.00, which is a nice increase compared with the $24.50 I was getting before this purchase. Given that the stock will go ex-dividend near the end of May, I will start receiving my higher dividend with the June payment. MCD will now contribute a total of $140.00 to my annual dividend income, which is $42.00 more than before. MCD has also become the largest position in my portfolio, slightly above Philip Morris International (PM).