This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

McDonald's Stock Is Past Its Prime -- Time to Throw in the Towel

Stock quotes in this article: MCD

NEW YORK (TheStreet) -- Like many shareholders, I have been wondering for several months now whether McDonald's (MCD) was a name worth holding. Sales trends at the fast-food giant have been tepid of late. Earnings growth has slowed. Some blame went to the slow economy in Europe over the past few years, some blame went to problems in Asia.

But, more and more frequently, one gets the feeling that the casual dining world has passed McDonald's by. Plus it seems that the company has no effective method for catching up to smaller, more nimble competitors offering healthier fare.

McDonald's shares were trading just over $101 on Thursday at 1 p.m., up nearly 0.6% for the day and 4.2% year to date. The stock is heavily shorted.

Although the stock has outperformed the S&P 500 (SPY) modestly year to date, this probably has more to do with the flight to safety from more high-flying groups earlier this year -- plus the company's 3.2% dividend yield -- than with any renewed growth expectations.

However sluggish the company's results were, many investors were probably holding on to the stock in anticipation of a new capital deployment plan.

That plan came out yesterday, May 28, and was greeted less than enthusiastically by the markets. The stock fell about 1% on a day the S&P 500 was up marginally. Volume was about 180% of normal.

The long-anticipated plan calls for the company to return $18 billion to $20 billion to shareholders from 2014 to 2016 via dividends and share buybacks. This, the company added, represented a 10% to 20% increase over the amount of cash returned between 2011 and 2013. In 2013, the company returned about $4.9 billion of its $7.1 billion of operating cash flow to shareholders. We're talking about going up to $6 billion to $6.7 billion going forward.

Big whoop!

That 10% is not enough to move the needle. While 20% seems possible, it is not assured. Much of the cash the company will redeploy is going to come from refranchising some 1,500 restaurants over the next two years, mostly in Asia-Pacific, Africa, Europe and the Middle East. Some cash will come from new debt.

Is this enough to get the stock moving upward and to the right again?

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,804.71 -238.19 -1.40%
S&P 500 1,946.16 -26.13 -1.32%
NASDAQ 4,422.0850 -71.3050 -1.59%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs