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McDonald’s breaks out to a new high. A time to buy the stock?

By:
on Nov 10, 2022
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  • McDonald's is a good dividend and defensive buy.
  • The stock broke past a key resistance.
  • McDonald's could face a correction toward the $267 zone and open buy entries.

Are you looking for a good stock to buy in the restaurant industry in a recession-troubled economy? McDonald Corporation (NYSE:MCD) is one such stock. The stock has a return of 2.43% year-to-date, compared to -18.54% for the composite S&P 500. A recent breakout for the stock could welcome a new high, and you will want to take advantage of it.

McDonald’s has been able to ride the macro troubles well this year. According to its President and CEO, Chris Kempczinski, the company “operates from a position of competitive strength.” That owes to its worldwide presence and brand popularity. Consequently, McDonald’s has continued to witness increasing customer traffic, especially in the US. 

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The dividend strength of McDonald’s has been sustained. The company has been paying dividends for the last 20 years. The payouts have risen at 8% CAGR in the last five years. Currently, the restaurant chain pays an attractive dividend yield of 2.18%. Investors looking for passive income should consider MCD a favourable stock. Growing earnings have supported the payout.

In its last quarter, Mcdonald’s profits came at $2.68 per share, better than the expected $2.58. Although 6% lower than in the same period last year, it showed the company’s resilience amid a depressed stock market. Analysts project the company to grow its EPS by an annual 6.7%. We expect the stock to rise further.

MCD hits oversold levels as price pumps

Source – TradingView

A daily chart outlook shows MCD on a slight correction after the stock hit $281. The stock broke past key resistance at $267. The RSI is above $70, indicating that investors have overbought the stock.

Is it time to buy MCD?

This article finds investing in MCD stock for value preservation and dividends ideal. For short-term buyers, the breakout at $267 could see the stock hit a new high. However, the stock is currently overbought. Investors should take advantage of a potential retracement.