Why McDonald’s Dividend Looks So Juicy

McDonalds (MCD)Written by Hank Coleman.

McDonald’s Corp. (MCD) recently decided to increase
its quarterly dividend. As it has done in previous years, McDonald’s raised the dividend by 10% from $0.70 per share to $0.77. Now, McDonald’s is paying out $3.08 per share annually to its shareholders in dividends which boost the company’s annual dividend yield to 3.32%, as of September 25, 2012.

 

McDonald’s Has A History Of Increasing Its Dividends

McDonald’s has increased its dividend every year since the company started offering dividends in 1976. Last year, the company saw an increase o f 15% of its dividend which was preceded by an 11% hike in 2010 and a 10% increase in 2009. This equates into a dividend growth rate over the past five years of 20.4%. This, of course, far exceeds the food service industry average of 5.1% dividend growth rate over the same period.

McDonald’s Supports Its Dividends With Cash

McDonald’s pays its dividends with the company’s free cash flow. While you may not think that this is that big an issue, you may be surprised to realize how that is not always the case. Other companies often issue bonds or take out loans to continue providing a dividend to their shareholders. Recently, Apple Inc. (AAPL) borrowed money to pay their first dividend in order to keep from having to repatriate money and pay taxes on it.

McDonald’s Dividends Versus Its Peers

When you look at McDonald’s dividend against the likes of other competitors in its industry such as Yum Brands (YUM) and Wendy’s (WEN), McDonald’s dividend does indeed look juicy. Despite also raising its quarterly dividend rate, Yum Brands’ dividends still only yield 1.96%. And, Wendy’s’ quarterly dividends have been decreased by the company four times in recent years reducing their quarterly payout from $.08 to $.02.

More Posts on McDonald’s

McDonald’s Analysis: I’m Still Lovin’ It @ Dividend Pig

Is McDonald’s Overpriced? Part-1 @ Dividend Ninja

McDonald’s Looks Fair Under $90 @ Dividend Monk

McDonald’s – A Wonderful Company @ Dividend Mantra

Readers, what’s your take? Do you own shares of McDonalds?

Disclosure: I am long McDonald’s. I plan on increasing my position through DRIPs.

5 Responses to “Why McDonald’s Dividend Looks So Juicy”

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  1. Dan Mac says:

    First dividend growth stock I bought. Looking forward to adding more to my position and owning for a very long time!

    • Dan, I couldn’t agree more! :)

      I’m wishing I held my shares and added more in hindsight, on the recent dip. But selling at $100 per share wasn’t that bad either. ;) This is a company I’d like to buy again and hold forever. If it goes lower I will.

      Cheers

  2. farcodev says:

    Interesting post, This stock will be the one of the US stock I’ll buy next year.
    Juicy it is! :D

  1. […] 6. Why McDonald’s Dividend Looks So Juicy @ The Dividend Pig. […]

  2. […] Coleman recently discussed McDonald’s at the Dividend Pig, in Why McDonald’s Dividend Looks So Juicy. One interesting point that Hank made, is that MCD has funded its dividends from […]

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