Shares of fast food giant McDonald’s (NYSE:MCD) have been falling in recent days due to an E.coli outbreak at its restaurants. The news comes as the company is about to report its latest earnings numbers, which are due later this week. The outbreak could impact the company’s guidance, including its outlook for the next few quarters.
For long-term investors, however, this may not necessarily be enough of a reason to be bearish on the stock. Outbreaks, while concerning and problematic for a business in the short term, may not necessarily hurt a company’s long-term growth prospects. Restaurant chain Chipotle Mexican Grill (NYSE:CMG) faced a similar outbreak in 2015 and it has more than recovered since then, as it has tripled in value over the years.
While McDonald’s might not triple or even double in value, it can still make for a good dividend stock to hold. The company has raised its dividend for decades and with a yield of 2.4%, its payout is higher than the S&P 500 average of 1.3%. There’s a significant incentive for investors to simply buy and hold the stock.
Now, with shares of McDonald’s coming under pressure, investors have the opportunity to buy it at a reduced price. The stock is down around 1% since the start of the year and it trades at a price-to-earnings multiple of less than 26. It may still struggle in the short term depending on how long the outbreak weighs on the business, but if you’re willing to hang on for multiple years, this can still make for an excellent income-generating investment to add to your portfolio.
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