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McDonald's (MCD) Rewards Shareholders With 8% Dividend Hike

Zacks Equity Research

In a shareholder-friendly move, McDonald's Corporation MCD announced a hike in its dividend payout. The company raised its quarterly dividend by 8% to $1.25 per share. The new dividend will be paid on Dec 16 to its shareholders on record as of Dec 2. The total fourth-quarter dividend payout will amount to over $900 million.

Notably, the company has a history of increasing dividend every year since the inception of its dividend payout policy in 1976.

The dividend yield, based on the new payout and the last closing market price, is approximately 42.1%.  In September 2018, McDonald’s raised its dividend by 14.9%.

In the last two years (2017 and 2018), McDonald's had returned more than $16 billion via dividends and share repurchases. Per its cash return target, the company returned $30 billion to its shareholders over a three-year period (2014 to 2016) via dividends and share repurchases. This represented an increase of around 80% over the amount of cash returned between 2011 and 2013.

McDonald's expects to return around $25 billion to its shareholders for the three-year period (ending 2019). As of August 2019, the company has already returned a cumulative $21 billion to shareholders in comparison to the company’s target of nearly $25 billion in three years.

We appreciate McDonald's’ consistent efforts to enhance shareholder returns, despite the sluggish economy across some of its major international markets. These initiatives reflect the company’s business strength and sustainability of its significant cash flows.

Considering the above-mentioned positives, we believe that McDonald's is an attractive option for income-seeking investors at the moment. It is to be noted that an income-generating and dividend-paying stock is always a preferred investment option. People looking for regular income from stocks are most likely to be inclined toward companies that have a track record of consistent and incremental dividend payments.

Price Performance

In a year’s time, this Zacks Rank #3 (Hold) stock has gained 27.4% compared with the industry’s 29.3% rally.



McDonald’s sales-boosting initiatives are driving global comparable sales (comps) higher. In second-quarter 2019, global comps grew 6.5%, marking its 16th straight quarter of positive comps. Also, U.S comps were up 5.7% in the period.

In order to drive comps in the United States, representing about 40% of the company’s business, McDonald’s intends to focus on bolstering guest traffic. To this end, it is accentuating on operational excellence, product innovation, offering a value menu and rolling out more limited-time offerings.

Key Picks

Better-ranked stocks worth considering in the same space include Cracker Barrel Old Country Store, Inc. CBRL, Jack in the Box Inc. JACK and Shake Shack Inc. SHAK, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cracker Barrel Old Country Store, Jack in the Box and Shake Shack have an impressive long-term earnings growth rate of 10%, 13% and 22.5%, respectively.

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