Yesterday’s live didn’t go to plan. Audio gremlins took my mic out and I couldn’t get it back mid-stream. Sorry to everyone who showed up.
The good news: I tracked down the problem, and I re-recorded the full walkthrough. It’s below.
I cover what McDonald’s sells (hint: it’s mostly rent and royalties), how the moat holds up, where growth is coming from, and whether $238 is a price I’d pay.
Grab a coffee and watch it. Hit reply and tell me if you agree with my verdict.
— Dave
Not investment advice. My own analysis.
This company is in big trouble. Dividend King status is going to kill them. 5.5 billion just to keep that status, explains why the dividend only rose by 4%. Total corporate debt load is $54.6 billion. it is a house of cards. Their interest coverage ratio is shrinking every year. they need 1.679 billion a year just for interest. The dividend is now going to eat up 70% of their free cash flow. The 46.22% operating margin is a mirage. Gross total revenue=27.7 billion leaves 12.66 billion after costs and overhead. Subtract 1.679 billion for interest, that leaves roughly 5.48 billion for everything else. And they announce an 8.5 billion support package?? Who do they think they are, the US Government? They will be forced to halt buybacks, take on even more debt adding to an already highly leveraged balance sheet, and accept a margin sacrifice near term. They have backed themselves into a corner where they have to borrow money to stay competitive. The CEO will be gone by next year second quarter if his paln fails, which it will.