McDonald’s Corporation (MCD), Yum! Brands, Inc. (YUM): Going Strong in a Slow Economy

Competition

McDonald’s rivals like Burger King Worldwide Inc (NYSE:BKW) and Yum! Brands, Inc. (NYSE:YUM) are in a race with McDonalds by offering a wide range of unique menus and value deals. Since 2007, Burger King Worldwide Inc (NYSE:BKW) sales have fallen by 12%, but in the same period, McDonald’s total sales have risen by 21%.

Changes in the ownership structure of Burger King Worldwide Inc (NYSE:BKW) are the primary culprit behind the slowdown in global sales. In the past it has twice been purchased by private owners and has twice gone public. McDonald’s has been able to power through all such crises due to its rich culture, and avoided any disruptions in the business.

Foreign food companies have been facing problems in China and McDonald is no different. The company sales have been on a decline China, primarily due to the bird flu outbreak. In the Chinese market, Yum! Brands, Inc. (NYSE:YUM) and Burger King Worldwide Inc (NYSE:BKW) are fierce competitors of McDonald’s. Yum! Brands, Inc. (NYSE:YUM) has been significantly affected by the outbreak because it relies more heavily on Chinese sales. In China, McDonald lags behind Yum! Brands, Inc. (NYSE:YUM) in term of revenue and market. Yum! Brands, Inc. (NYSE:YUM)’s popularity in China is due to its focus on Chinese appetite for fried-chicken menu items at its KFC restaurants.

Strong dividend

According to Forbes, McDonald’s is in Dividend Channel’s top 25 stock list due to strong return and constant dividend hike over the time. The company has a dividend yield of 3.10%. Its current PE on a trailing twelve month basis is 18.38, below the restaurants industry average of 48.03 and its price to book ratio is at 6.52, lower than the industry average of 8.06. McDonald’s share price has risen 9.9% this year, and closed at $99 on Friday.

Final words

Competition in the food market is increasing, but McDonald’s has a broader exposure to the growing international market, and is one of the strongest brands in the world. It has a strong dividend history which is beneficial for its investors. This makes the company a reliable long term investment.

The article Going Strong in a Slow Economy originally appeared on Fool.com is written by Red Chip.

Red Chip has no position in any stocks mentioned. The Motley Fool recommends Burger King Worldwide and McDonald’s. The Motley Fool owns shares of McDonald’s. Red is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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