Oak Brook, Illinois-based McDonald's Corp. (MCD) recently increased its quarterly dividend by 10% from 70 cents per share paid previously. This equates to an annual pay out of $3.08 per share. The increased dividend will be paid on December 17, 2012, to stockholders of record as of December 3, 2011.
McDonald's has a history of increasing dividend every year since the inception of its dividend pay out in 1976. The recent hike in dividend brings the annual dividend yield to 3.32%, as of September 25, 2012.
McDonald's has further enhanced shareholders’ value by repurchasing 9.4 million shares in the second quarter of 2012. In 2012, the company expects to return $5.5 billion in cash to shareholders via dividends and stock buybacks.
McDonald's is the world’s largest chain of fast food restaurants, with more than 33,500 units in over 119 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 20.4%, much faster than the industry average of 5.1%.
The last dividend hike of 15% to 70 cents was announced in September, 2011. Prior to that, McDonald's announced a dividend hike of 11% in September, 2010 and 10% in September, 2009 along with an authorization of $10 billion for share repurchase.
On the same day that McDonald’s announced its hike in dividend, one of its peers, Yum! Brands Inc. (YUM) also raised its dividend by 18% to 33.5 cents. Another peer, Brinker International Inc. (EAT) increased its quarterly dividend by 25% to 20 cents per share in August end.
McDonald's forward annualized dividend yield of 3.29% surpassed the industry average of 1.27% as well as the forward annualized dividend yields of 1.96% and 2.27% of Yum! Brands and Brinker, respectively.
The company had cash and cash equivalents of $2.5 billion as of June 30, 2012, which reiterates the fact that the company holds a strong cash position and has the ability to further boost shareholders’ value.
We appreciate McDonald's efforts to consistently enhance shareholders’ returns, despite the economic depression. We believe that an increase in dividend payment affirms the company’s optimistic outlook and indicates that it is heading towards 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.
BRINKER INTL (EAT): Free Stock Analysis Report
MCDONALDS CORP (MCD): Free Stock Analysis Report
YUM! BRANDS INC (YUM): Free Stock Analysis Report
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