MCD

[Dividend Watcher]

(07-14-2016, 04:49 PM)Forticus Wrote: So with respect to your question, all I can say is that I will not use the Sacred Parchment as a napkin.  


I did three valuations based on my buy price and data from 2015. 1) DCF, 2) P/E in 10 years based on EPS growth and 3) P/E in 10 years  based on ROE (from growth of equity). The latter two described in "Buffettology". The tables of (2) and (3) say that the value per share will reach $122 in 2021. So if I want to become a serious DGI, all I should do is to watch the dividends rolling in? 
Table (3) was a bit confusing as which numbers to use. MCD doubled debt per share and almost quartered down equity per share since 2014 (data from stockrover).
Based on equity and ROE from 2014 I will have a YOC of 14% in 2025.
Based on recent/last DGR 4.7%, the YOC in 2025 will be 5.6%

Are you asking should you hold MCD with these predictions to be considered a DGI. Mais non! If you're calculations are correct, some would sell here and take the capital gains.

Others, like me, are satisfied to just collect the dividends for now. Yes, I could give up the gains should MCD return to more "normal" valuation levels but that could be several years. Since I am working on my dividend income stream for retirement that's less than 10 years away, I'd rather either use the dividends to add to my smaller positions or add a new position. Perhaps, if the valuation took a big enough dip, I'd turn on the DRIP again and add a few more shares to my pile.

I can see a younger person taking the gains and using it for something else.

It all depends on your needs, goals and how you manage your portfolio. I don't think there's a correct answer.