After trailing the market this year, shares of McDonald's are now a good value, especially considering their 3.1 percent dividend yield, according to David Tarantino of Baird Equity Research, who has upgraded the stock to outperform from neutral.
"We believe the risk/reward on MCD has become more favorable for investors with a 6-12+ month horizon," Tarantino wrote to clients Tuesday. "While we acknowledge that slower U.S. industry demand trends and challenging upcoming comparisons pose a short-term headwind, we believe the company's attractive dividend yield can help to limit further downside risk in the shares, and we see opportunity for investor sentiment to improve as MCD gets past challenging compares and shows further progress on enhancing its business model."
The analyst raised his 12-month price target to $128, representing a 10 percent increase from Monday's close. McDonald's is down 3 percent on the year, trailing a 6 percent gain for the Dow Jones industrial average.