03-22-2013, 08:41 PM
(03-22-2013, 03:36 PM)bobbyboy1970 Wrote: You can't really call it cheaper today than if you bought at $82. If you bought before at $82, you still get today's $3.08 in dividends, so you are way ahead as compared to buying today at just shy of $100.
Well, sure. I don't mean to suggest that I didn't get in at a good time or that I'd rather pay $99 than $82 for the same stock and dividend. So far it seems that my purchase is working out, both from a capital gains perspective and from a dividend perspective.
But your original question was about whether it is a bad idea to buy MCD now, after the recent run up. All I am pointing out is that from at least one perspective, the stock is a better value today than back in late 2011, even though you could have picked it up cheaper then. And that is accurate. I'll restate it: For every dollar you put into MCD today at a price of $99 per share, you receive more dividend income than for each dollar when I bought the stock at $82. Today you get a yield above 3%, while back then the yield at purchase was less than 3%.
Since you don't have a time machine (I'm assuming!), all you can do is look at the conditions prevailing today and make a go / no go decision. What I am saying is that from a dividend yield perspective, I would not be put off by the recent run up in price. Now, of course dividend yield fluctuates with price. If you have a look at this chart, you'll see that the yield of MCD has been higher and lower than today. And of course, this is only one of very many factors to look at before making a purchase decision.
But as a very general matter, with a high-quality dividend growth stock like MCD, over a long time horizon, it is reasonable to expect the share price to increase along with the dividend payout, such that the dividend yield stays more or less in something of a range. Outside of a temporary and market-wide shock, MCD's yield is unlikely to get up to 5 percent, because as the payout rises, more people will buy it, bidding up the price. So don't be scared of new highs in a quality DG stock. It may just mean that the price is following the dividends, as it should.