Would you like a dividend with that Big Mac?McDonald's (
) 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
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
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.