McDonald’s is up 31% in 2011; Should You Chase it in 2012? (MCD)


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Fast food juggernaut McDonald's Corporation ( MCD ) has seen its share price rise almost 31% in 2011. That sort of outperformance doesn't mean you should continue to chase the stock higher in 2012, however.

MCD outperformed the rest of the Dow 30 components handily this year. Only IBM ( IBM ) (+26%) and Pfizer (+24%) can compare with the outstanding price action we've seen in MCD. What's more, Home Depot ( HD ) (+20% in 2011) is the only other Dow 30 stock that appears in the Top 5 of the Dow 30 in terms of both 2010 and 2011 performance.

We first recommended McDonald's here at back in August of 2009, when its shares were around the $56 level. We then downgraded the stock to "Neutral" this past August.

The stock has continued to run up since then, but dividend investors should take heed: with a yield now under 2.8% and an ultra-premium valuation, McDonald's shares will be hard-pressed to repeat their 2011 performance. We'd love to see MCD pull back to the $85 to $90 levels before we consider adding any additional shares.

McDonald's stock posted modest gains in premarket trading Wednesday.

McDonald's Corporation ( MCD ) is not recommended at this time, holding a DARS™ Rating of 3.4 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks , as well as a detailed explanation of our ratings system here .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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This article appears in: Investing Stocks
Referenced Stocks: HD , IBM , MCD , PFE

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