Americans Can't Even Afford McDonalds Now?

These shares probably never should have traded over $100. At that price the stock was trading for about 20 times earnings, while the average stock in the S&P 500 was trading for around 13 times. McDonald's is a great company, it has solid management, it is relatively recession-proof, but valuation matters.

Today, McDonald's Corp. said that its global same-store sales jumped by 3.3% last month. In the United States, same-store sales climbed up 4.4%. However, the company warned that economic weakness across the globe will mean second-quarter earnings per share will be cut by approximately 7-9 cents.

FactSet Research projects McDonald's to earn about $1.41 in shares during the coming quarter. In premarket trading, McDonald's shares dropped down by 2.7%.

While valuation matters, some speculators believe $60 is simply too “poor” although $100 was probably a bit too “rich” as well.

Here's why blogger Richard Bloch is long on MCD and believes the dividend growth story of this stock alone easily makes it worth more than $60.

The chart below represents McDonald's PE over the past couple of years, courtesy of Ycharts.com.

And here's a chart depicting the price-to-sales ratio:

According to Bloch, McDonald's has experienced remarkable dividend growth of 40% in just three years. Take closer look at its dividend yield levesl from the the past five years.

Despite Bloch's optimistic outlook for McDonald's in the long-term picture, the firm is still very concerned that the poor economy is putting some serious pressure on profit. McDonald's previously closed down at $88.38, according to MarketWatch. As far as Q2 goes, it doesn't sound too promising for them...

Wealth Wire