5 Tasty Facts on McDonald's New Dividend

McDonalds (NYSE: MCD) investors get an increase. The titan fast food recently announced an increase of 8% of its quarterly dividend, bringing the annual payment to $ 5 per share.

Given its long list of annual increases and improved operational trends in recent years, the increase was not a surprise. But there are still some facts about the dividend that investors might ignore.

Source of the image: Getty Images.

1. This is the 43rd consecutive increase in the chain's dividend.

The 8% increase in the dividend follows the 15% rise of last year and marks the 43rd consecutive year of increase in McDonald's payments, which dates back to the moment the chain began pouring its quarterly dividend in 1976. The fast food sector has been upset time, and the pace of change has only accelerated in recent years (though the 50 years of the Big Mac, last year, shows what some tastes are remarkably stable).

McDonald's remains today a leader in its sector, primarily thanks to its flexible operational approach. In recent years, for example, investors have seen the chain significantly reduce the number of restaurants owned by the company, introduce fundamental changes in ingredients and food preparation, and introduce radical updates to its stores and menu options.

2. McDonald's can afford it.

This increase brings the annual payment to approximately $ 3.6 billion, less than half of the $ 9 billion in operating profit made by McDonald's last year. The payout ratio is similar when you compare it to net profits. The dividend represents about 61% of last year's net result and this percentage is expected to decrease in fiscal year 2019, given the increase in profits of the chain.

3. This is part of a massive ROI plan that needs to be refreshed soon.

The dividend is a relatively small part of a huge capital return program described by Managing Director Steve Easterbrook and his team in 2017. Stock repurchases have played a bigger role in this initiative, which has already reported $ 21 billion to shareholders.

The combination of a higher dividend and regular redemptions should push these expenses to $ 25 billion by the end of the year. McDonald's investors can therefore expect to see a new capital return program announced to replace it in the coming months.

4. The dividend does not detract from the investments of the stores.

McDonald's dividend increases in recent years have not threatened to steal resources from the chain's high capital spending program. It invests nearly $ 2 billion in upgrading its US store base in 2019, after all, as part of an initiative that management describes as the largest real estate investment in the chain at this time. day.

It is good news for shareholders that Mickey D can achieve historically significant spending movements while generating impressive revenue growth.

5. The rise is a sign of management's confidence in its rebound plan.

Easterbrook and his team had some interesting financial metrics on which to support to gauge the magnitude of this year's hike. McDonald's sales growth has historically been strong in international markets and its US base segment is starting to recover as well, although customer traffic remains stuck in negative territory. Same – store sales growth accelerated in the last quarter, reaching a record 6%. The operating margin of the fast food giant amounts to 45% of turnover thanks to its aggressive refranchis plan.

McDonald's still plans to spend money on redeveloping stores and delivering to more of its US sites over the next year. Yet its strong cash position should easily support these investments while leaving a large amount of excess resources to be allocated to share buybacks and dividend increases.