Oak Brook, Illinois-based McDonald's Corp. (MCD) recently increased its quarterly dividend by 15% from 61 cents per share paid previously. This equates to an annual pay out of $2.80 per share. The increased dividend will be paid on December 15, 2011, to stockholders of record as of December 1, 2011.
McDonald's has a history of raising dividend every year since the inception of its dividend pay out in 1976. The recent hike in dividend brings the annual dividend yield to 3.26%, as of September 22, 2011.
McDonald's has further enhanced shareholder value by repurchasing 9.2 million shares in the first half of 2011. The company expects to return $6 billion in cash to shareholders in 2011 via dividends and stock buybacks.
McDonald's is the world’s largest chain of fast food restaurants, with more than 33,000 units in over 100 countries and 80% of its restaurants are franchised. The company has a consistent track record of not only paying quarterly dividends but also increasing the same every year, supported by its cash position. Over the last five-year period, McDonald's dividend has grown at a rate of 27.5%, much faster than the industry average of 6.3%.
The last dividend hike of 11% to 61 cents was announced in September 2010. Prior to that, McDonald's announced a dividend hike of 10% in September 2009 along with an authorization of $10 billion in share repurchase.
One of McDonald's peers, Yum! Brands Inc. (YUM) announced an increment of 14% in its dividend to 28.5 cents, earlier this month. Another peer, Brinker International Inc. (EAT) increased its quarterly dividend by 14% to 16 cents per share in August-end.
McDonald's forward annualized dividend yield of 3.20% beat the industry average of 1.52% as well as the forward annualized dividend yields of 2.21% and 2.95% of Yum! Brands and Brinker, respectively.
The company had cash and cash equivalents of $2.1 billion as of June 30, 2011, which reiterates the fact that the company is in a strong cash position and has the ability to further boost shareholders value.
We appreciate the efforts of McDonald's to consistently enhance shareholder returns, despite the economic downturn. We believe that an increase in dividend payment affirms the company’s optimistic outlook and indicates that it is heading toward future growth. McDonald’s currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment