If a $1.00-per-share dividend sounds rich in the grand scheme of things, well, it is a pretty good deal. This move makes McDonald's dividend the 37th largest in the S&P 500. Company head Jim Skinner said that the move "reflects confidence in the ongoing strength of our business and the reliability of our substantial cash flow."
McDonald's plans to return at least $10 billion to shareholders through dividends and share repurchases from now until 2008. Earlier this year, hedge fund Pershing Square Capital Management (the same hedge fund that pushed for rival Wendy's
Share buybacks are all the rage lately, and dividends also certainly seem to be picking up steam. Last week, longtime Fool Rick Munarriz pointed out that Darden
Along the same lines, a recent article by Fool contributor Ryan Fuhrmann noted that now that such moves are so commonplace, you can't always make some of the bullish cases about share buybacks -- for example, that a company institutes a buyback because it considers its shares undervalued. Nonetheless, such moves certainly don't discourage people looking for lucrative investments. Lower share counts do improve earnings per share, and dividends give investors concrete cash returns above and beyond simple stock appreciation. (Many investors prefer dividend investing for that little extra value proposition, and our Motley Fool Income Investor newsletter explores such a strategy.)
McDonald's has been trading at new 52-week highs lately, and it's up 20% in the last year, thanks in part to initiatives such as these, not to mention its continued quarterly earnings successes. It's been a highly successful turnaround from the company's lows a few years back, and at the moment, shareholders can hardly complain about the rewards from Mickey D's.
For related Foolishness, see the following articles:
- Get the skinny on share buybacks.
- McDonald's still seemed pretty hot last quarter.
- Several months ago, though, some wondered if it were underdone.
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Alyce Lomax does not own shares of any of the companies mentioned.