I’ve been investing in McDonald’s for a decade and still I’m lovin’ it

Gustatory geopolitics aside, it’s nearly a decade since I first invested in McDonald’s, paying $95 per share in July 2014, as reported here at that time. It has sizzled up to become my third most valuable holding. I am still buying based on the evidence of my own eyes, rather than more technical data. Put plainly, I have eaten under the golden arches in many countries and never seen a quiet branch. They are usually full of young people enjoying an affordable treat.

Strong demographic demand extends to the home of culinary connoisseurs: France’s 1,560 outlets make it McDonald’s biggest national chain outside America. This global business, which claims to feed 69 million people a day in more than 100 countries, is a big beneficiary of the boom in eating out.

However harsh the cost of living crisis must be for many people, fewer parents now seem willing and able to spend as much of their lives in the kitchen as my mother did. This boy got into grammar school before our family first dined out together, in celebration — at Ye Olde Swiss Cottage, a pub-restaurant on a traffic island in north London, since you ask.

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For investors who like facts and figures with their fries, McDonald’s shares yield 2.5 per cent income, with shareholders on June 2 due to get our next payment on June 13. Dividends have increased by an annual average of 8.3 per cent over the past five years, according to the independent statisticians Refinitiv, part of the London Stock Exchange Group.

Dividends can be cut or cancelled without warning, but if the current rate of ascent is sustained, shareholders’ income would double in less than nine years. While the past is not necessarily a guide to the future, the fact remains that McDonald’s has increased its dividends annually, without fail, for 48 years.

Given how many Americans prioritise shares that pay rising and reliable income to fund retirement, with many Brits now seeking the same, it would be surprising if this $196 billion (£154 billion) business did not try hard to keep flipping dividends higher until it hits the half-century mark, two years hence. If it fails, many shareholders might feel very disappointed.

A payout ratio equal to 54 per cent of corporate earnings does not look too demanding. A gross profit margin of 57 per cent, which costs net down to 33 per cent, and a return on investment (ROI) of 18 per cent all look good.

Many middle-class folk like to sneer at this business — perhaps as an “acceptable” way to distinguish themselves from its customers by proxy. I even know one who blames McDonald’s for deforesting the Amazon in Latin America, although all the beef it serves in Britain and Ireland is raised here. So are all its eggs. Last year it announced that every egg it sold in America was laid by cage-free hens and it aims to hit the same cruelty-free target here next year.

The semi-skimmed milk in its tea, coffee, porridge and Happy Meal bottles in the United Kingdom is organic. Less happily, McDonald’s discontinued its vegan burger, McPlant, in America due to lack of demand. But the plant-based patty, which is produced by the California-based Beyond Meat and approved by the Vegetarian Society, is still on sale in British branches.

I don’t suppose it will satisfy the kale and quinoa brigade, but this business also claims to back healthy eating by cutting saturated fats in its cooking oil by 80 per cent and halving the calories in its mayonnaise. Fruit and salads struggle with the reality that you can only sell food the customers want to eat.

In these worrying times McDonald’s is a reassuringly old-fashioned business. It has many happy customers, perhaps too many to be popular with some folk, and a long history of rising dividends. I’m lovin’ it.

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Core strategy: I have taken an Apple windfall

Diversification is a simple way to diminish the risk inherent in stock markets because spreading our money over dozens of different shares avoids the danger of disaster at any one business causing catastrophic losses. It means never having to say: “Darling, we are ruined.”

It’s easy to explain but difficult to put into practice when it means selling some of our winners, which feels like punishing success. But that’s what I just did when shares in the technology giant Apple (AAPL) became worth just over 9 per cent of my forever fund.

Mindful of the unit trust rule, which says that no single holding should become more than 10 per cent of the fund, I sold a five-figure parcel at $182 a share to reduce Apple to 8 per cent of my life savings. In the short term selling was a mistake because these shares were trading at $190 on Friday. But I’m not bothered because maximising returns is only one of my investment objectives. Managing risk so that my money should not expire before I do is among this DIY investor’s other aims.

Bear in mind I first bought these shares in February 2016, as reported here at that time, for $23.75 each, allowing for a subsequent four-for-one stock split. Apple is my most valuable holding and it felt timely to harvest some.

Rising tensions between America and China give reasons to be fearful. Other considerations include awareness that technology shares have had a terrific run that cannot continue for ever. As I may have pointed out before, paper profits are all very well but we haven’t really made a penny until we sell.