Fin - Breakout - US

McDonald’s: A “Brilliant” Stock Pick, Says Fund Manager

Jeff Macke
Breakout

You're reading this online. That fact suggests you're young, hip and demographically attractive. You've also most likely never gotten to the end of an investment column which included the phrase "dividend yield." Don't click out of this just yet. As is the case with fashion, all stock trends eventually repeat themselves, and dividend stocks are no exception.

Will yield become the new black, or is the dividend craze going the way of the recent attempt to resurrect bell bottoms? To answer the question Breakout spoke to Matt McCormick, portfolio manager with Bahl & Gaynor, who likes to invest in generally stodgy companies with a history of paying, and raising, dividends.

McCormick has made his bones with Breakout by making our viewers money, and he suggested that Procter & Gamble (PG), McDonald's (MCD), Qualcomm (QCOM) and The Bank of Nova Scotia (BNS) were buys. Below, you'll see how they've performed.

McCormick's March Picks

  • Proctor & Gamble (PG): 5.6%
  • McDonald's (MCD): 8.6%
  • Qualcomm (QCOM): 3%
  • Bank of Nova Scotia (BNS) (2.3%)
  • S&P 500: (3.2%)

Now that we have your attention, McCormick is still pounding the table on Procter & Gamble and Micky-D's. Waxing poetic, he describes P&G as the "quintessential blue-chip consumer staple focused on needs, not wants."

The Cincinnati stalwart with the logo that's launched a million conspiracy theories has raised dividends for 54 consecutive years. McCormick says P&G is run by a West Point hard-nose focused on efficiency -- just as a company selling and distributing products all over the globe should be. McCormick concludes that P&G is perfect for investors "looking to participate in stocks but want a smoother ride."

Speaking of which, McCormick likes McDonald's for its ability to remain true to its roots while still finding new growth. Along those lines he notes the newly renovated stores and the addition of a second drive-thru lane. This may seem like a whole lot of nothing to most folks, but a second lane both improves the customer experience and raises revenue. Of such subtle initiatives are built-to-last companies and stocks made.

Other initiatives are higher profile but relatively low risk. Take for instance McDonald's relatively high-profile coffee initiative from a couple years ago. No matter what the press said at the time, McDonald's never intended to take out Starbucks (SBUX) with coffee. Not everyone who wants a decent cup of joe needs a barista and Wi-Fi. They need speed and something good, albeit probably not "healthy" to go with their java.

A niche was available, and McDonald's filled it. Gorgeous. To seal the deal on my high opinion of McCormick, when told I him I was long the golden arches, the Bahl & Gaynor portfolio manager immediately responded: "You're brilliant. You're brilliant."

He had me at the first "brilliant." You simply aren't going to find a better judge of companies or people than a guy like this.

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