McDonald’s Stock Declines Amid E. coli Outbreak: Should Investors Stay the Course?

Recent reports have linked an E. coli outbreak to McDonald’s (NYSE:MCD) quarter pounders, resulting in 49 illnesses. One person has died from the outbreak. This has triggered a temporary removal of the popular burger from some locations, causing the stock to fall.

For McDonald’s, the news comes before it releases its latest earnings numbers, and it could lead to a more cautious forecast moving forward. The danger is that in the near term, the company may struggle due to the outbreak, especially as it comes at a time when consumers are still dealing with rising costs and the economy isn’t in ideal shape.

Still a good dividend play?

For dividend investors, McDonald’s offers consistent payouts even during challenging times. With a dividend yield of approximately 2.3% and an impressive track record of raising its dividend for nearly 50 consecutive years, the company has been one of the most reliable dividend stocks in the market. McDonald’s operates a resilient business model, with over 40,000 locations globally, potentially insulating it from regional disruptions like the current E. coli outbreak. And with a payout ratio of less than 60%, the company has a buffer to continue raising its dividend payments even if its earnings come under pressure in the near future.

Food safety issues can harm a company’s reputation, but McDonald’s has survived past crises, including health scares. Chipotle Mexican Grill (NASDAQ:CMG) experienced an E. coli outbreak in 2015, which led to a steep decline in its valuation but ultimately it recovered and it has made for a terrific growth stock over the years. McDonald’s diversified revenue streams and global footprint position it to rebound quickly, especially as the issue is isolated to a specific menu item.

Is McDonald’s stock a good buy?

McDonald’s stock fell by 5% on Wednesday and on a year-to-date basis it’s up less than 1%. But despite the current dip, McDonald’s remains a strong buy for dividend investors. Its consistent dividend growth, robust global business model, and ability to weather crises make it a reliable option for those seeking stability and long-term returns in their portfolio.