On Monday, I opined about rumors and the upcoming two-day analyst meeting for McDonald's
The big news was the first-quarter 2006 IPO of Chipotle Mexican Grill shares. McDonald's is going to sell a minority interest in this emerging, popular fast-casual restaurant chain with 460 locations scattered around 22 states. While the company didn't disclose the number of shares to be offered or the expected price, creating a publicly traded company would allow McDonald's to recapture some of its investment in Chipotle.
The lure for long-term investors is what will happen to Chipotle and its 65,535 combinations of gourmet burritos (there are 16 possible ingredients) after the IPO. McDonald's stock is priced at 17.1 times trailing earnings. Consider this: Sonic
Other good news was that, for the 29th consecutive year, the company increased its dividend. The 22% increase to $0.67 a share represents a 2.0% yield.
The company also confirmed its goals: 3%-5% annual sales growth, 6%-7% annual operating income growth, and a "high-teens" return on incremental invested capital. That growth will allow the company to return between $5 billion and $6 billion to shareholders during 2006 and 2007 combined. Talk about a cash cow!
Investors looking for McDonald's to monetize its real estate wealth, like Sears Holdings'
That "It's all about the franchisees" mantra might be a sour note to the ears of Pershing Square Capital Partners and its ilk. While the Chipotle news is excellent, there still might be an investment group with enough capital to take a stake in McDonald's and seek to shake out its real estate wealth.
McDonald's is only expected to grow earnings 8.6% a year for the next five years (2% a year less than the S&P 500). It currently posts a trailing P/E of 17.1 compared with 19.8 for the S&P. But in my opinion, this cash cow is still an interesting value given its strong results and focus on "reinvigorating" itself.
Fool contributor W.D. Crotty owns shares in McDonald's. Click here to see The Motley Fool's disclosure policy.