Revenue and EPS of McDonald’s
McDonald’s (MCD) recorded revenue growth of -3% in 2016 compared to growth of -7.4% in 2015. This was driven by a decline in every segment, namely US, international lead markets, high growth markets, foundation markets, and corporate. Revenue growth of -4% was recorded in 1H17. This was driven by a decline in every segment barring high growth markets. EPS rose 14% in 2016 after -1% growth in 2015. Lower operating costs and share buybacks drove this, offset by higher interest costs. The EPS recorded a 26% growth in 1H17. Lower operating costs and share buybacks drove this growth, offset by higher interest costs. The company has managed to generate enough annual free cash flow balance to pay off its dividends.
Dividend trajectory of McDonald’s
The downward sloping dividend yield curve of McDonald’s after 2016 is due to rising prices. The rising prices have offset the impact of an increase in dividend per share. McDonald’s has a dividend yield of 2.6% and price gains of 29.6% on a YTD basis. This compares to the Dow Jones Industrial Average (DJIA-INDEX) (DIA) of 2.3% and YTD price gains of 14.7%. The S&P 500 (SPX-INDEX) (SPY) has a dividend yield of 2.4% and YTD price gains of 13.3%. The NASDAQ Composite (COMP-INDEX) (ONEQ) has a YTD price gain of 21.4%.
The FlexShares Quality Dividend Defensive Index Fund (QDEF) is a dividend ETF with exposure to McDonald’s. The ETF has a dividend yield of 2.7% and a PE of 23.4x. Legg Mason Low Volatility High Dividend ETF (LVHD) is a dividend ETF with exposure to McDonald’s. It has a dividend yield of 2.5% and a PE of 16.7x.