Analysis and Opinion »

Musings on McDonald’s Dividend

Charles Sizemore
Share on StockTwits
Published on

McDonald’s Corp (MCD) announced that its domestic U.S. sales dropped 4% in February. That’s bad. Really bad. And it probably won’t get better for a while. A battleship this size cannot turn on a dime, and McDonald’s will have a hard time reinventing itself as the healthy Chipotle (CMG) of fast-food burger joints.

But while McDonald’s has its problems, it’s commitment to shareholders is hard to match.


You can say what you want about $MCD, but long-term dividend investors are lovin’ it. 5-yr yield on cost: 6.4% 10-yr: 27.1%

— Charles Sizemore (@CharlesSizemore) Mar. 9 at 02:16 PM

Even after several years of cruddy operational results, $MCD‘s three-year dividend growth rate is 11.3% annualized.

— Charles Sizemore (@CharlesSizemore) Mar. 9 at 02:17 PM

Payout ratio is a little on the high side, so div growth will moderate. But still a remarkable case study in shareholder friendliness. $MCD

— Charles Sizemore (@CharlesSizemore) Mar. 9 at 02:18 PM

The dividend growth numbers are almost ridiculous. After growing its dividend at a 23% annual clip over the past 10 years, long-term investors now enjoy a yield on their original cost of 27.1%.

The rate of dividend growth has slowed in recent years, and I don’t expect to see annualized growth anywhere near those historical levels again. But they show that McDonald’s is committed to its shareholders, and I have no doubt that management will find a way to continue growing the dividend in the years ahead, even if it is at a more modest 5% per year. And frankly, the 3.5% current dividend yield is a lot higher than what you’ll get in most other “income” securities. It’s certainly higher than the current dividend yield on the Utilities Select Sector SPDR ETF (XLU) and on several of the larger REITs.

This article first appeared on Sizemore Insights as Musings on McDonald’s Dividend

Share on StockTwits