After McDonald's (MCD 0.34%) shares went public on April 21, 1965, its CEO, Ray Kroc, bought a 220-acre ranch in California's Santa Ynez Valley. He had reason to celebrate: McDonald's shares had surged by 35% within 24 hours of the IPO. While impressive, the lightning-fast gain must have made many investors wonder if they had missed their best chance to profit from the fast-food juggernaut.
But since going public at $22.50 per share, or $0.03 per share when you account for stock splits, McDonald's share price has risen by 1,051,600% as of January 30's market close.
Image source: Getty Images.
A decades-long rally with plenty of doubters
Interestingly, despite this incredible decades-long rise, McDonald's had doubters at every turn. A 1978 New York Times article noted "uninterrupted" earnings growth since the 1965 IPO, but speculated that growth would slow as competitors "gnaw at the company's markets."
Yet roughly 10 years later, the same publication noted that McDonald's had doubled sales over the prior six years, with plans to open 500 restaurants worldwide in 1987 alone. Earnings and sales were both up over 10% year over year, totaling $113.6 million and $3.17 billion in the last quarter of 1986, respectively. By contrast, in its most recent quarterly earnings report, McDonald's reported $2.02 billion in earnings and $6.39 billion in sales. That's a 1,900% rise in quarterly earnings and a 123% rise in sales since the 1978 warnings.
The second-guessing of the company continued, however. Legendary investor Warren Buffett unloaded tens of millions of shares in 1998, while billionaire fund manager Bill Ackman trimmed his position in 2006. That year, in its article "Big Mac Whack," The New York Post passed on Ackman's estimate that the 1,500 company-owned stores McDonald's sold around that time had lost over $60 million the previous year.
Possibly the most bearish warning on McDonald's came in 2014 from Janney Capital Management. Titled "That's Not Ketchup ... It's Blood," it noted two months of falling same-store sales in the U.S., a worse-than-expected sales drop in Europe, and predicted only a "small" chance of a quick rebound for McDonald's. Yet share prices are up 360% since that 2014 report came out.
NYSE: MCD
Key Data Points
So, how much would $100 in McDonald's IPO be worth today?
So far, we've only covered the 1,051,600% capital appreciation since McDonald's IPO, but we haven't said how much $100 worth of shares would be worth today. That $100 would have purchased roughly 4.44 shares of McDonald's stock at the $22.50 IPO price. Those 4.44 shares would have gone through 12 stock splits and totaled roughly 3,237 shares today, and would be worth approximately $1,021,306 today (with no dividends reinvested).
But with 49 years of dividend increases, income is a big factor, too. The aforementioned 3,237 shares would pay out $24,081 a year in dividends for anyone holding those shares today. And later this year, McDonald's is highly likely to announce a dividend milestone that only about one in 1,000 companies hit.
While McDonald's journey hasn't always been smooth, the results have been life-changing for long-term investors. It's a testament to the power of a unique brand, decades of international growth, and one company's ability to keep surprising people along the way.
