) recently provided an update on its "Plan to Win" strategy at the
Sanford C. Bernstein Thirtieth Conference, which includes a cash
return target over a 3-year period. The company's Plan to Win
strategy involves tasks like optimizing the menu, enhancing the
customer experience and broadening accessibility to the brand.
With this recent update, the company further intensified its
commitments under its customer-focused strategic framework.
Following the announcement,
) affirmed McDonald's A2 unsecured and P-1 commercial paper
Per its cash return target, the company intends to return wealth to
its shareholders in the range of $18.0 billion to $20.0 billion
over a 3-year period from 2014 to 2016 via dividends and share
repurchases. This represents an increase of 10.0% to 20.0% over the
amount of cash returned from 2011 to 2013.
McDonald's has been regularly rewarding its shareholders through
share repurchases and dividends. The company has a history of
increasing dividend every year since the inception of its dividend
payout policy in 1976 with the latest being a 5% increase in Sep
2013. Moreover, during the past five years ended 2013, it has
returned about $26.0 billion to shareholders through share
repurchases and dividend payments.
Meanwhile, the company has also decided to re-franchise
approximately 1,500 restaurants mainly in the Asia/Pacific, Middle
East and Africa and Europe over the same period. This represents
more than 50.0% increase over the previous 3-year period.
Currently, around 81.0% of its restaurants are franchised.
We believe re-franchising a large chunk of its system reduces
the company's capital requirements and facilitates earnings per
share growth and ROE expansion. Alongside, free cash flow continues
to grow, allowing reinvestment for increasing brand recognition and
The company intends to work on its general and administrative
spending so that the resources can be reallocated to high growth
areas, which also includes the development of its global digital
capabilities. The digital wave has hit the U.S. fast casual
restaurant sector as more and more restaurants are deploying
technology to enable a better guest experience. So the company's
focus in this area would drive traffic. A few other restaurants
chains that are aggressively moving on this track are
Panera Bread Company
Buffalo Wild Wings Inc.
), both of which use tablets and kiosks to drive traffic.
Despite frequent menu innovations and focus on customer value,
McDonald's has been struggling to increase sales amid a weak
consumer spending environment and stiff competition from other
leading hamburger chains. We believe that this Zacks Rank #3 (Hold)
company is trying to mitigate these effects with its
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