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McDonald's Versus Starbucks: Income Or Growth?

Recently I was asked which company might be a more reasonable investment: McDonald's (MCD) or Starbucks (SBUX). Now I'm not going to provide a recommendation - everyone's investing objectives differ - but I would like to develop a lens by which judgments could be made.

When thinking about "better" or "more reasonable" in the investment world, you're ordinarily talking about investment returns, or at least anticipated investment performance. In doing so, there are two basic ways to think about returns: income-based or total-return based. Sure you could dream up additional possibilities, but really it comes down to "how much will I receive?" or "how much will it be worth?"

Let's start with the income side whereby your primary focus is on the income stream rather than what someone else may or may not be willing to pay in the future. In concentrating on cash flow, you don't have to worry… Read More …