McDonald's Plummets to 3% Dividend Yield, But Is It a Bargain?
McDonald's shares have plummeted 26% from their February peak, causing its dividend yield to surge to a multi-year high of 3%. This has investors questioning whether the Dow Jones Industrial Average constituent is a value trap or an attractive bargain. The company's CEO, Chris Kempczinski, acknowledged that McDonald's is operating in a 'challenging environment,' but emphasized that management is working on improvements.
Despite this, McDonald's trailing price/earnings ratio has fallen from above 25 to just above 20, while its dividend yield grew from 2.3% to nearly 3%. The company's second-quarter results showed systemwide same-store sales were up only 1.3%, and management conceded that McDonald's didn't offer enough value propositions to meet customers' needs.
However, analysts believe that this is a buying opportunity, with a consensus price target of $313.50, 24% above the current price. The company is expected to announce its 50th consecutive annual per-share dividend increase soon, which will further boost its attractiveness.