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A Look at Fast Food Restaurants’ Dividend Policies

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Importance of dividends

The sales of cyclical companies such as fast food restaurants are greatly affected by the performance of the economy and other macro factors. So, dividends help in smoothing out the return volatility for shareholders.

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Dividends

During the quarter, McDonald’s (MCD) paid dividends of $0.94 per share at a yield of 2.4% and a payout ratio of 58.3%. For the next two quarters, analysts are expecting McDonald’s to pay dividends of $1.93 to take its total for 2017 to $3.81. The 2017 estimated dividends represent growth of 5.5% from $3.61 in 2016.

Jack in the Box (JACK) has paid dividends of $0.40 per share at a yield of 1.6% and a payout ratio of 39.3%. For the next two quarters, analysts are expecting the company to pay dividends of $0.82 to take the total for 2017 to $1.62, which represents growth of 24.6% from $1.30 in 2016.

In 2Q17, Wendy’s (WEN) has paid dividends of $0.07 per share at a yield of 1.8% and a payout ratio of 60.9%. For the next two quarters, analysts are expecting the company to pay dividends of $0.14 to take the total to $0.28. The 2017 dividend estimates represent growth of 12% from $0.25 in 2016.

Restaurant Brands International (QSR) has paid dividends of $0.19 in 2Q17 at a yield of 1.3% and a payout ratio of 42.1%. For the next two quarters, analysts are expecting QSR to pay dividends of $0.40 to take the total for 2017 to $0.77, which represents growth of 24.2% from $0.62 in 2016.

Share repurchases

Apart from paying dividends, McDonald’s, Jack in the Box, and Wendy’s reward their shareholders through share repurchases. Share repurchases reduce the number of shares outstanding, thus boosting the company’s EPS. In the last four quarters, McDonald’s, Jack in the Box, and Wendy’s repurchased shares worth approximately $5.8 billion, $369.1 million, and $145.6 million, respectively.

Next, we will look at valuation multiples of fast food companies.

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