Assessing the Sustainability and Growth of McDonald's Dividend Payments
McDonald's Corp (MCD, Financial) recently announced a dividend of $1.67 per share, payable on 2023-12-15, with the ex-dividend date set for 2023-11-30. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's delve into McDonald's Corp's dividend performance and assess its sustainability.
What Does McDonald's Corp Do?
McDonald's Corp is the world's largest restaurant owner-operator, with 2022 system sales of $116 billion across more than 40,000 stores and 115 markets. The company has pioneered the franchise model, expanding its global footprint through partnerships with independent restaurant franchisees and master franchise partners. McDonald's Corp generates nearly 60% of its revenue from franchise royalty fees and lease payments, with the remaining revenue primarily coming from company-operated stores across its three core segments: the United States, internationally operated markets, and international developmental/licensed markets.
A Glimpse at McDonald's Corp's Dividend History
McDonald's Corp has a longstanding tradition of consistent dividend payments, dating back to 1977. The company distributes dividends quarterly and has increased its dividend annually since 1977, earning it the prestigious title of a dividend aristocrat. Below is a chart showing the annual Dividends Per Share to track historical trends.
Breaking Down McDonald's Corp's Dividend Yield and Growth
As of today, McDonald's Corp boasts a 12-month trailing dividend yield of 2.15% and a 12-month forward dividend yield of 2.36%, indicating anticipated dividend increases over the next year. Over the past three years, the company's annual dividend growth rate was 6.20%, and this rate expanded to 8.00% per year over a five-year span. The annual dividends per share growth rate over the past decade stands at 7.10%. Consequently, McDonald's Corp's 5-year yield on cost is approximately 3.16% as of today.
The Sustainability Question: Payout Ratio and Profitability
The dividend payout ratio is a critical metric for evaluating dividend sustainability. McDonald's Corp's payout ratio is currently at 0.54, which suggests a balance between distributing earnings as dividends and retaining funds for future growth and stability. The company's profitability rank is an impressive 9 out of 10, indicating strong earnings potential relative to peers. McDonald's Corp has consistently reported positive net income annually for the past decade, reinforcing its robust profitability.
Growth Metrics: The Future Outlook
McDonald's Corp's growth rank of 9 out of 10 signals a promising growth trajectory. The company's revenue per share and 3-year revenue growth rate of 3.80% per year outperform approximately 65.34% of global competitors. McDonald's Corp's 3-year EPS growth rate of 8.80% per year and 5-year EBITDA growth rate of 6.80% further demonstrate its capacity to sustain dividends and growth.
Concluding Thoughts on McDonald's Corp's Dividend Sustainability
In conclusion, McDonald's Corp's consistent dividend growth, prudent payout ratio, strong profitability, and solid growth metrics collectively suggest a favorable outlook for dividend sustainability. For investors, McDonald's Corp represents a compelling option for those seeking reliable dividend income with the potential for growth. As the company continues to adapt and thrive in the dynamic foodservice industry, its ability to maintain and possibly increase dividend payments remains a strong possibility. Value investors may consider McDonald's Corp as a potential addition to their portfolios, leveraging the financial insights provided by GuruFocus to make informed investment decisions. For further exploration of high-dividend yield opportunities, GuruFocus Premium users can utilize the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
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