McDonald’s dividend yield
There are three ways that a company can return cash to its investors—dividends, share repurchases, or a combination of both. Dividends serve as a constant source of income. They affect a shareholder’s investment decisions.
In this part of the series, we’ll look at McDonald’s (MCD) dividend yield—compared to other restaurant companies.
The company raised its quarterly dividends by 5%. It distributed $0.85 per share to its investors. The company targets to return $18–$20 billion between 2014 and 2016. McDonald’s has already returned $6.4 billion to shareholders.
Other restaurant companies include Yum! Brands (YUM), Wendy’s (WEN), Starbucks (SBUX), Domino’s Pizza (DPZ), and Jack In The Box (JACK). Yum! Brands had a dividend yield of 2.5%. Wendy’s had a yield of 1.9%. Starbucks had a yield of 1.3%. Domino’s Pizza had a yield of 0.97%. Jack In The Box had the lowest dividend yield of 0.28%.
The Consumer Discretionary Select Sector SPDR Fund (XLY) holds restaurant stocks. It also pays dividends. As of September 2014, it had a yield of 1.45%.
Dividends are paid in cash. They come from a company’s ability to generate excess income. Excess income is a function of higher sales and stable costs. McDonald’s generated $7.9 billion in operating income during the fiscal year ending in December 2014. Management stated that its business model continues to generate significant amounts of cash amid softer performance.
The high yield is a good reason for investors to hold on to the stock. It explains why the stock only dropped 1.5% after the quarter’s terrible results.
In the next part of this series, we’ll discuss how the stock performed after the earnings were released.