3 Reasons Investment Experts Say McDonald’s Stock Offers Safety Amid Volatility
Written by
Dawn Allcot
Edited by
Cory Dudak
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Amid a tumultuous stock market plagued by tariff concerns, investors are seeking safe places to park their money. For some, this means moving toward tangible assets like gold. However, you can also find stocks that are relatively safer than the big tech brands featured on the Nasdaq index.
As the stock market fell in early April, investment expert Jim Cramer said on CNBC’s Squawk on the Street, “The rates are really braking. And then you buy a safety. Buy a McDonald’s… You just gotta look at companies whose brand names are good.”
In the past 20 years, McDonald’s has outperformed the S&P 500 and the Nasdaq, shared Vince Stanzione, bestselling author of “The Millionaire Dropout” and CEO and founder of First Information. “The stock is up around 7%, which considering current markets is not too shabby,” he noted.
Several factors make McDonald’s stock an investor’s favorite for those looking for a safe buy in a volatile market with a potential recession looming.
Recession-Resistant Offerings
McDonald’s combines a household brand name with a consumable product that is relatively recession-resistant due to the low price of its food. “Rather than go to higher-priced sit-down restaurants, consumers will often shift down to fast food during a recession,” according to Sure Dividend.
Furthermore, McDonald’s boosted its earnings per share substantially during the Great Recession. Its stock also weathered the pandemic, further proving its resilience in challenging economic conditions.
Real Estate and Tech
What really sets McDonald’s apart, however, is not the company’s beloved Happy Meals and Big Macs. “In reality, the Golden Arches is more about real estate and franchising fees,” Stanzione said. “The company owns the land and buildings of most of its franchised locations; this provides a very steady stream of income.”
Additionally, McDonald’s takes a tech-forward approach to the fast food industry, which further sets it apart from competitors. “Many do not realize that McDonald’s is a big investor in technology and early adopter of the self-ordering screens used in most locations, which use many clever techniques to get you to spend more,” Stanzione said. “This company, in my view, will keep innovating and provide a steady return regardless what happens in the global economy.”
Dividend Earning
Personal finance expert Suze Orman has recommended investing in dividend earning stocks amid an impending recession. “When I look at my dividend portfolio… I’m only down half a percent from the beginning of the year and I’m getting a nice dividend,” she said.
Stanzione agreed that McDonald’s dividends are another factor that makes the stock enticing. “MCD has compounded returns of over 14.5% (dividend reinvested) for the last 20 years,” he said.
During the Great Recession, McDonald’s earnings-per-share saw several jumps, rising from $2.91 in 2007 to $4.60 in 2010, according to Sure Dividend.
Final Note
Like Orman, Stanzione recommended dollar cost averaging your exposure to McDonald’s. He mentioned that YUM Brands — parent company of KFC, Taco Bell and Pizza Hut — is a similar stock to consider and concluded, “I prefer MCD stock… It’s actually one of my favorite long-term stocks.”
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