Is McDonald’s (NYSE:MCD) losing its credibility among investors?

With dual income scenarios in most households, eating out or grabbing a quick meal is becoming more and more popular. In recent years, we have seen numerous new chains and franchises opening up worldwide. One name, that stands out among all others is McDonald’s (NYSE: MCD). Its reputation has led it to be the top dividend stock, with a 3.6% dividend yield.

But the company has come face to face with many challenges which led to stagnant sales and has given room to competitors to take over. The question that arises now for many investors is to think of this as a short term problem, and invest for the long run. Some are even considering stop purchasing McDonald’s (NYSE: MCD) stocks, until the problem is addressed. Evaluating the company’s strengths and weaknesses in a nutshell, this is what can be lined up:

Strengths:

- McDonald’s (NYSE: MCD) is among the 500 Dividend Aristocrates Index, which means it ought to have 25 years of outstanding dividend growth, whereas McDonald’s (NYSE: MCD) has 38 consecutive years of dividend growth.

- McDonald’s (NYSE: MCD) has 35000 restaurants in 119 countries, giving the company leverage to attain desired prices from suppliers, and an upper hand when handling financial conditions.

- In May, this year; the company introduced a new three year cash return plan of $18 billion to $20 billion for its investors. This shows the company’s ongoing commitment to cater to its investors.

Weaknesses:

- McDonald’s (NYSE: MCD)’s capital distribution is slightly above its internal cash-flow generation. In the first two quarters this year, it produced $2.24 billion in cash but its cash distribution to investors rounded up to $2.74 billion.

- Potential growth seems to have stopped after the company kept offering similar sales for months, and August 2014 figures show sales decline by 3.7% as compared to August 2013.

- Increasing health concerns worldwide is effecting McDonald’s (NYSE: MCD) sales on a large scale. Since its food offerings are high on calories and aren’t considered healthy, it’s taking its toll on the sales. And McDonald’s (NYSE: MCD) doesn’t seem to be doing much to handle the situation. It made an attempt to introduce premium sandwiches and coffee, but that approach backfired as it put more pressure on employees in terms of service quality and speed, due to new products.

- A survey by Consumer Reports ranked McDonald’s (NYSE: MCD), as last among US fast food chains in terms of customer satisfaction.

- Due to demand, competition seems to be increasing. The Chipotle Mexican Grill seems to be making remarkable sales with its offers of healthy meals made with natural products. Its last quarter, results showed a massive increase of 28.6% sales.

After viewing this, one can easily conclude that McDonald’s (NYSE: MCD) has much longer list of weaknesses as compared to strengths. And the company should start taking these points into consideration, and come up with a quick back up plan before it loses more clients and eventually, the investors too.