It has been a lackluster year for McDonald’s (MCD). But the company’s plans to increase its dividend by 10% could make the fast-food giant more appetizing for investors.
McDonald’s announced its dividend increase late yesterday. This morning shares have risen 0.7% to break the $93.80 level for the first time since early May.
The company is bumping its quarterly dividend to 77 cents a share from its current 70-cents-a-share level. First payment of the more generous dividend is slated for December 17, and is payable to anyone who owns McDonald’s shares as of December 3.
So this could be a strong last three months for a stock that could use a shot of adrenalin.
Entering the day, McDonald’s shares were down 5.76% for the year and 4.5% since May 2. A couple disappointing earnings reports in the second and third quarters – both of which fell short of the previous two quarters – have dragged the stock down.
A weak global economy has weighed on profits. Last quarter, the company’s global sales dipped for the first time in almost a decade. Not surprisingly, sales in Europe were especially weak, falling 0.6% from the same quarter a year ago.
Meanwhile, McDonald’s is getting stiff competition from some of its fast food contemporaries.
Burger King (BKW) went public again in mid-June after almost a two-year stock-market absence. Shares of Yum! Brands (YUM), which owns KFC, Pizza Hut and Taco Bell, are up more than 17% in 2012. And Wendy’s (WEN) has been expanding its menu to appeal to a wider range of customers amid growing demand for healthier options.
With no impending menu overhaul and a stock that’s been stuck in the mud of late, upping its dividend – as it usually does this time of year – was McDonald’s way of attracting investors’ attention.
So far it’s working.
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