McDonald's Serves Up Steady Profit, Tasty Dividends


Would you like a dividend with that Big Mac?McDonald's ( MCD ) has made a lot of headlines lately, most of them negative.

On Thursday, workers in California, Michigan and New York filed suit against the chain, alleging various wage-stealing violations.

That comes after same-store sales missed forecasts the past two months. Tossing in profit and sales growth that slowed to the low-single digits and underwhelming stock-price performance makes it apparent why a growth investor might not be happy.

But the world's No. 1 burger chain is a classic menu staple for income investors.

For starters, McDonald's is a member of the elite S&P 500 Dividend Aristocrats index, made up of companies that have increased annual dividends every year for the past 25 years. Make it 38 years for the fast-food giant.

It currently pays a quarterly dividend of 81 cents a share, or $3.24 a year. That works out to an annualized yield of 3.3%, well above the S&P 500's 1.87% average.

After trading mostly sideways the past year, shares popped 4% March 11 in heavy turnover, the same day the S&P 500 and Dow industrials fell 0.5% and 0.4%, respectively. They regained their 50-day and 200-day moving averages as a flat base continues to form.

The catalyst? CFO Pete Bensen said at a conference that McDonald's could return more than $5 billion to stockholders this year via dividends and share buybacks. Last year it returned $4.9 billion to shareholders.

Its return on equity has held above 34% the past four years, double the 17% minimum threshold investors should demand.

The Oak Brook, Ill.-based company boasts a three-year Earnings Stability Rating of 2 on a scale from 0 (most stable) to 99 (most volatile). Despite the recent slowdown in its growth rate, annual per-share profit has increased each year since 2003.

Analysts expect that streak to continue with a 5% gain this year and 9% the next.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Personal Finance , Investing Ideas

Referenced Stocks: MCD

Investor's Business Daily

Investor's Business Daily

More from Investor's Business Daily:

Related Videos




Most Active by Volume

  • $10.50 ▲ 3.04%
  • $29.22 ▲ 4.62%
  • $16.36 ▼ 0.49%
  • $113.29 ▲ 0.33%
  • $2.39 ▲ 4.82%
  • $5.78 ▲ 0.87%
  • $105.62 ▼ 0.02%
  • $28.42 ▲ 2.53%
As of 8/28/2015, 04:15 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Data Provided by