About Rod D. Martin
Praise for Rod D. Martin
Book Rod to Speak
Politics & Economics
Technology & Markets
Faith & Culture
by Rod D. Martin
July 27, 2015
So what is everybody’s beef with McDonald’s?
I tend to be pretty contrarian, so it won’t surprise you that I remain unconvinced that McDonald’s (NYSE:MCD) is near death. It’s certainly not my favorite stock in the world. But as I see it, the piling on we’re hearing is just making it tomorrow’s bargain meal.
There’s no question: the Big Mac is facing uncharted waters. I’ve written elsewhere about its labor troubles (and why they don’t matter that much). But there are other issues, many of them, from poorly performing marketing initiatives to a stronger dollar, all adding up to declining same-store sales.
That’s newsworthy, to be sure. It’s especially so because it’s new: we’re not used to hearing about McDonald’s having these sorts of troubles.
But is McDonald’s really in decline, or even near death?
No.
McDonald’s is the number one fast food vendor on the planet. It’s worth $92 billion: that’s Yahoo plus the Ford Motor Company with room for umpteen major newspapers. It has over 36,000 locations in 125 countries. It’s every child’s favorite destination, and many of us can still sing its yesteryear marketing jingles in our sleep.
It’s not going anywhere.
The stock? Not bad. McDonald’s 10-year return is an annualized 15.64%. Even if you reinvested all your dividends the S&P 500 clocked in at just 7.482% over the same period. The Dow did a little better at 8.144%, but that’s still half of Mickey D. Shorter term, MCD is up 3.92% over the last 12 months, and 4.84% since the beginning of the year. The SPY is just 2.17%.
Looking at the company itself, revenue grew over the last decade from $20.46 billion to $27.44 billion, for a compound annual growth rate of 3.32%. Earnings per share in the same period grew from $2.04 to $4.82, for compound annual growth of 10.02%.
That ain’t chicken feed. The naysayers will respond that that growth is slowing, and of course that’s true. But analysts expect that slowed growth — and did I mention it is still growth? — to fall to around 7% over the next few years. That’s Chinese GDP level growth, during a rough patch.
McDonald’s is a key holding of pension funds and retirees for another reason: it has raised its dividend every one of the last 39 years. Not just paid it: raised it. The company now pays out 76.4% of its earnings to its shareholders. Indeed, McDonald’s has increased that payout at an annual rate of 19.6% over the last decade. Add its current 3.6% yield — much richer than the market as a whole — to 7% expected growth in earnings per share, and wow.
Clearly a 76.4% payout ratio limits MCD’s ability to keep increasing that number. But with a net margin of 19.59% (admittedly slipping a bit of late), this is a good company, period.
Would I buy right now? Certainly. While it might not hurt to let the media guys beat it up some more. It’s a bargain in the low $90s, and would be a great part of a conservative portfolio aimed at long-term dividend income.
Growth is slowing. Part of that has been the Great Recession. But global population growth is slowing too: there aren’t as many more people who still need access to a Chicken McNugget. That’s a trend that will prove problematic for many big businesses over the next few decades (not all, but many): many western nations are actually shrinking, and population growth in much of the rest of the world is moderating fast. And McDonald’s is already in most of those markets anyway.
So McDonald’s is facing some adjustments to be sure. This is going to be a challenging decade. What it won’t face is a near-death experience. And don’t let anyone convince you otherwise.
Rod is one of our nation’s leading minds. He’s smart, original, and very committed—a combination that one rarely finds.
Rod Martin and [former Howard Dean campaign manager] Joe Trippi are America’s two foremost experts on online politics.
Rod Martin is a Reaganite-Thatcherite conservative…[and] a man who has spent much of his life ministering to and working for the benefit of others. I know Rod as an advocate for freedom, a leader who understands the real changes we need in Washington, and who has the drive and ability to make those changes happen.
Rod Martin is the kind of dynamic leader who has the knowledge, ability and experience to lead us successfully into the 21st Century. His vision for America is compelling.
Rod Martin literally wrote the book on excellence. Humble yet brilliant, a man of love and compassion, with penetrating clarity he illuminates the world around us, and we are both stirred and enlightened.
Rod Martin is a born leader and an outstanding political mind. Anyone who takes him on is going to have a serious fight on their hands.
Rod Martin is a man of uncommon vision and character. Ever since I first worked alongside Rod in the early days of PayPal, I’ve been struck by his powerful vision for the future. Rod understands the intersection of technology, politics and culture in a way that few others do.
Rod Martin wears with uncommon grace an uncanny ability to link his vigorous faith to the practical challenges of both the business world and the political arena. Yet the respect he shows for others carries a warmth and modesty that are both too rare among those who are strong advocates of feisty positions.
America badly needs more leaders who really get the future. We need more Rod Martins.
Rod Martin is a modern day philosopher-statesman. He is a capitalist intellectual, a conservative iconoclast, a gentle adversary and a kind prophet. He inspires us towards a fresh national vision built upon the original founding principles.
Rod Martin is not only effective and efficient, but he is also perceptive, wise and gracious. He gets things done. He is a great friend and a great ally.
Rod is one of the sharpest, most gracious men I know, and one of the most gifted political thinkers today. His ability to analyze issues and communicate thoughtful insights on them have earned him the respect of people across the political spectrum.
I am proud to have been Rod Martin’s friend for a quarter century, and I can tell you that he is one of the finest men and most outstanding leaders in our church and in our country today. He has a knack for turning everything he touches to success.
Rod Martin is a cornucopian entrepreneur and eutropic thinker whose influence radiates through an array of companies, institutions, movements and churches. A renaissance American, he is also a prolific friend of freedom and faith around the globe.
If Rod Martin represents the next generation of leaders, America has nothing to worry about.
A leader and a servant, in public life and in private, Rod Martin strides at the top of his profession, and has nowhere to go but up. He is in the truest sense of the word ‘outstanding’.
Rod Martin is undoubtedly one of the most accomplished thought leaders today. He is a wonderful mentor, a humble role model, and a deep inspiration for the next generation of scientific innovators and entrepreneurs.
Rod’s achievements pale beside his character and his brilliance. He sees what others can’t. He leads when others won’t.
Rod Martin is one of America’s finest young minds.
