McDonald's Corp. (MCD) hiked its quarterly dividend by 4 cents to 85 cents per share, a 5% increase from the prior dividend payout. This equates to an annual payout of $3.40 per share, up from $3.24 per share.
McDonald’s has a consistent track record of not only paying quarterly dividends but also increasing the same every year, since the inception of its dividend payout program in 1976. The latest hike brings the forward annual dividend yield, as of Sep 18, 2014, to 3.64%. The increased dividend will be paid on Dec 15, 2014, to stockholders of record as of Dec 1, 2014.
This comes exactly a year after its last dividend increase announced on Sep 19, 2013. That time too, the company had increased its dividend by 5% from 77 cents to 81 cents, which was paid on Dec 16, 2013. Prior to that, McDonald’s had increased its quarterly dividend by 10% 15%, 11% and 10% in Sep 2012, Sep 2011, Sep 2010 and Sep 2009, respectively.
McDonald’s is not the only company in the restaurant sector paying attractive dividends. Another sector behemoth, Yum! Brands, Inc. (YUM) has also been raising its dividend over the last few years, irrespective of economic peaks and valleys. Brinker International, Inc. (EAT) has also increased its dividend since it began paying the same in Nov 2010. In fact, both these companies recently increased their dividends. Yum! Brands increased its dividend earlier this month while Brinker hiked it last month.
McDonald’s has consistently enhanced shareholders’ return via share repurchases and dividends. During the past five years ended 2013, it has returned about $26 billion to shareholders through share repurchases and dividend payments. Through Aug 2014, the company has returned $3.2 billion to its shareholders and targets to return $18 to $20 billion between 2014 and 2016.
We appreciate McDonald's effort to hike its dividend despite being caught up in difficulties owing to the China supply issue and the temporary closing of its restaurants amid allegations of violation of sanitary rules in Russia. McDonald’s presently has a Zacks Rank #5 (Strong Sell). Chipotle Mexican Grill, Inc. (CMG) is a better-ranked stock in the same sector that sports a Zacks Rank #1 (Strong Buy).
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