McDonald’s(NYSE: MCD)is known best by investors for its continually growing dividends. The well-respected fast-food chain has paid a growing dividend for already 45 years and is often stated as aDividend King. So, if McDonald’s stock has sustained its dividend for more than 45 years, it has probably overcome several economic downturns. Before you consider McDonald’s stock, you may want to find out if it is a halal stock by reading our blog.
McDonald’s Business Activity
McDonald’s is one of the world’s most recognized and leading foodservice companies. It engages in the operation of restaurants in more than 100 countries on six continents. McDonald’s menu offers burgers, sandwiches, nuggets, wraps, fries, salads, beverages, desserts and etc. The company’s main market includes Canada, France, Australia, Germany, Italy, Russia, Spain, the Netherlands, and the U.K. More than 90% of Mcdonald’s restaurants are run by franchisees. Though the company is headquartered in Chicago, more than half of the revenues are generated outside the US. The company owns 55% of the real estate and 80% of the buildings in its franchise system and meanwhile offers significant leverage in maintaining quality standards and consistency.
Is McDonald’s stock halal?
Firstly, we check the business activity of McDonald’s. The company’s impermissible business activities comprise only 0.05% of its overall revenue. However, 40.64% of total revenue comes from a questionable business segment. Since questionable business activities may exceed 5% of its total revenue, McDonald’s stock falls into the questionable category in the first screening criterion.
Secondly, we conduct a financial screening analysis. Of course, we screen the company’s interest-bearing debt ratio. The interest-bearing debt should not exceed 30% of the company’s market capitalization. In McDonald’s case, the percentage of interest-bearing debt is 29.21% of its market capitalization. So, we can conclude that it meets the criteria.
| Total Debt | $47.56B |
| Market Cap | $162.81B |
Finally, we need to screen for interest-bearing securities. McDonald’s interest-bearing securities account for 2.46% of its market capitalization, and the total amount of securities that earn interest should not exceed 30% of its market capitalization.
| Cash & Equivalents | $4.01B |
| Market Cap | $162.81B |
In conclusion, McDonald’s Stock passes two financial screenings. However, it does not pass from the first criteria since a significant percentage of its revenue comes from unknown business activities. Therefore, McDonald’s stock is marked as “Doubtful” at the Musaffa platform, and it is not recommended for Muslims to invest in such stocks.
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Related Articles
As an enthusiast with a deep understanding of financial analysis and Islamic finance, I can confidently delve into the details of the provided article and shed light on the concepts involved.
1. McDonald's Business Activity: McDonald's (NYSE: MCD) is a globally recognized foodservice company operating in over 100 countries. The menu includes a variety of items such as burgers, sandwiches, nuggets, wraps, fries, salads, beverages, and desserts. Over 90% of McDonald's restaurants are operated by franchisees, and despite being headquartered in Chicago, more than half of the company's revenues are generated outside the United States. McDonald's holds ownership of 55% of real estate and 80% of the buildings in its franchise system, providing significant control over quality standards and consistency.
2. McDonald's as a Halal Stock: The article discusses the halal status of McDonald's stock, considering two main criteria: business activities and financial screening.
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Business Activity Screening:
- Only 0.05% of McDonald's overall revenue is from impermissible business activities.
- However, 40.64% of total revenue falls into a questionable business segment.
- Since questionable activities exceed 5% of total revenue, McDonald's stock is categorized as "questionable" in this screening.
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Financial Screening Analysis:
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Interest-bearing debt should not exceed 30% of the company's market capitalization.
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McDonald's interest-bearing debt is 29.21% of its market capitalization, meeting the criteria.
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Interest-bearing securities should not exceed 30% of market capitalization.
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McDonald's interest-bearing securities account for 2.46% of its market capitalization, meeting the criteria.
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3. Conclusion:
- McDonald's stock passes two out of three financial screenings.
- However, it is categorized as "Doubtful" on the Musaffa platform for Muslim investors due to a significant percentage (40.64%) of its revenue coming from questionable business activities.
- The conclusion advises against Muslims investing in such stocks based on Islamic finance principles.
This analysis showcases a comprehensive understanding of Islamic finance principles, including the evaluation of business activities and financial metrics to determine the halal status of a stock. The detailed breakdown of percentages and adherence to specific criteria reflects a thorough assessment of McDonald's as an investment option from an Islamic perspective.
