At its investor day, McDonald’s recently gave a medium-term outlook. The world’s largest restaurant chain intends to significantly expand the number of its branches in the coming years.

The end of the success story is not in sight even almost 70 years after its founding. McDonald’s remains an attractive long-term investment especially for conservative investors.

Franchising allows for much higher margins The US company currently operates around 41,000 branches worldwide. Although the number of restaurants has steadily increased in recent years, sales in the 2022 fiscal year were almost 18% lower than the previous record of 28.1 billion dollars achieved in 2013. However, this is not the result of a weak business development – excluding Corona – but pure calculation.

While sales shrink, operating profits increase. This is because more and more restaurants are not run by McDonald’s itself, but by franchisees. Since 2012, the proportion of branches run by franchisees has increased from 81% to 92%.

McDonald’s is becoming more and more of a real estate company. The US company collects rent, a generous franchise fee, and is also involved in sales. The result is much higher profit margins. At the same time, most of the entrepreneurial risk is shifted to the franchisees.

Fast food giant wants to continue to expand At a recent investor day, the company gave a medium-term outlook. In the coming years, the company plans the biggest expansion wave in its history. By the end of 2027, the chain is to be expanded by an average of 5% per year to around 50,000 restaurants. Most of the new branches are to be opened in China, India and Brazil, with around 3,500 in the Middle Kingdom alone.

By then, the profit margin should continue to be improved. For 2024, the management is targeting system-wide sales growth of 2%, followed by 2.5% in the following years.

For the 2023 fiscal year, which is about to end, analysts are forecasting a 10% increase in sales to 25.5 billion dollars. The profit is expected to grow by around 17% to 11.79 dollars per share.

Dividend has been increasing for 47 years The fast-food giant has been growing steadily for many years. This also applies to the dividend. Since the first dividend payment in 1976, the distribution has been increased in all but one year. McDonald’s is therefore one of the so-called dividend aristocrats, which have increased the dividend steadily for at least 25 years.

Only recently, the quarterly dividend was increased by 10% to 1.67 dollars per share. On a yearly basis, McDonald’s pays out 6.68 dollars per share. The dividend yield is currently 2.3%.

Source: www.aktienscreener.com

Impressive long-term upward trend Not only profits and dividends are increasing steadily, but also the share price. Between July and October, there was a slightly sharper correction of 18% from the all-time high of 299 dollars. However, the share has almost made up for this decline.

Only 3% are missing to the highest level. If the breakout to new highs succeeds, the upward trend will enter the next round. In the next year, prices around 350 dollars are realistic. On top of that, there is a decent and steadily increasing dividend. For conservative investors, McDonald’s stock remains a promising investment.