McDonald’s Hikes Dividend
The Oak Brook, Illinois-based McDonald’s Corp. (MCD: 77.38 +0.31 +0.40%)recently announced its decision to hike quarterly dividend by 6 cents to 61 cents per share. This translates into an 11.0% increase from the prior dividend. The increased dividend will be paid on December 15, 2010, to stockholders of record as on December 1, 2010. McDonald’s has a history of raising dividend every year since it paid first dividend in 1976 and brings the forward annual dividend yield as of September 23, 2010, to 3.27%. The new dividend yield of the company is approximately 75 bps more than a 10-year Treasury.
McDonald’s is the world’s largest chain of hamburger fast food, with more than 32,000 restaurants 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 provides a hike every year, supported by its cash position. Over the last five-year period, McDonald’s dividend has grown at a rate of 30.1%, a much faster pace than the industry average growth rate of 9.3%.
Last year in September, the company increased its dividend by 10% to 55 cents and also authorized a $10 billion share repurchase program.
One of McDonald’s peers, Yum! Brands Inc. (YUM: 51.12 +0.44 +0.87%) also announced an increment of 19% in its dividend to 25 cents, last week.
Another peer of the company, Brinker International Inc. (EAT: 25.18 +0.49 +1.98%) increased its quarterly dividend by 27% to 14 cents per share on March 26, 2010, to boost shareholder value.
McDonald’s forward annualized dividend yield of 3.27% inched past the industry average of 1.55% as well as forward annualized dividend yields of 1.89% and 3.12% of Yum! Brands and Brinker, respectively.
McDonald’s is rich in cash and is armed with cash and cash equivalents of $1.7 billion as of June 30, 2010, further reiterating the fact that the company is in a strong cash position and has the ability to provide a sound value to its shareholders.
We appreciate the effort of McDonald’s to consistently enhance shareholder returns, even in times of an economic downturn. We believe that an increase in dividend payment affirms the company’s optimistic outlook and depicts that it is heading toward future growth.
| Analysts' Targets | |
| Barclays Capital | $86 |
| Overweight | |
| Friday, October 22, 2010 | |
| UBS Securities | $86 |
| Strong Buy | |
| Friday, October 22, 2010 | |
| Deutsche Bank Securities | $89 |
| Hold | |
| Friday, October 22, 2010 | |
| RBC Capital Markets | $85 |
| Sector Perform | |
| Friday, October 22, 2010 | |
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