McDonald's (NYSE: MCD) investors gain an increase. The Fast Food Titan recently announced an 8% increase in its quarterly dividend, bringing the annual payout to $ 5 per share.
Given the long-term results with annual increases and improved operating performance in recent years, the promise increased It's not much of a surprise. But there are still some facts about the dividend that investors may not know.
. It is the chain's 43rd yield increase in a row.
The 8% dividend increase follows last year's 15% increase, marking McDonald's 43rd annual issue of annual payout, and dates back to when the chain began its quarterly dividend back in 1976. The fast-food industry has experienced a lot of upheaval on time, and the pace of change has only increased in recent years (although the 50th anniversary of Big Mac last year shows how some flavors are remarkably stable).
McDonald's is still a leading industry today, largely thanks to its flexible operating method. In just the last few years, for example, investors have seen the chain drastically reduce the level of corporate-owned restaurants, roll out basic ingredient and cooking changes, and introduce extensive updates to stores and menu options.
2. McDonald's can afford it.
The increase brings the annual payout to about $ 3.6 billion, which is less than half of the $ 9 billion operating income McDonald's made last year. The payout ratio is similarly strong when you compare it to the profit. The dividend represents about 61% of last year's net income, and that percentage is likely to fall in the 2019 fiscal year given the chain's revenue increase.
3. It is part of a massive return on capital plan that will soon be updated.
The dividend is a relatively small part of a large capital return program that CEO Steve Easterbrook and his team outlined in 2017. Share buybacks have played a bigger role in this initiative, which has already returned $ 21 billion to shareholders.
The combination of higher dividends and steady buybacks would push spending to $ 25 billion by the end of the year, and McDonald's investors can expect to see a new capital return program announced to replace this in the coming months.
4. The dividend does not take away from store investment.
McDonald's dividend increases in recent years have not threatened to steal resources from the chain's increased capital expenditure program. After almost $ 2 billion in modernizing its US store base in 2019, in an initiative that management describes as the chain's largest real estate investment to date.
There is good news for shareholders that Mickey D & # 39; s can make historically large spending moves while still providing growth in the industry.
5 The trip is a sign of management's confidence in the rebound plan.
Easterbrook and his team had a few attractive financial metrics to rely on when considering the size of this year's increase. McDonald's sales growth has been continuously strong in international markets, and the core of the US segment is also beginning to emerge, even though customer traffic is still stuck in negative territory. Comparable sales growth accelerated in the last quarter, rising to an industry-leading 6%. The fast-food giant's operating margin increases between 45% of sales thanks to its aggressive acquisition plan.
McDonald's is still planning to spend money on store remodeling and bringing delivery to several of its US locations over the next year. Nevertheless, the robust cash flow should easily support these investments, while also containing many excess resources that can be directed toward stock repurchases and a growing dividend.