McDonald’s Corporation (NYSE:MCD) is one of the most recognized brands in the world. Forbes ranks McDonald’s as the world’s sixth most valuable brand, as there is no corner on the globe where someone wouldn’t recognize the McDonald’s golden arches. That makes McDonald’s stock one of the best blue-chip stocks to watch for dividend investors looking for retirement income.
If you believe in a quality company that will have no problem paying out dividends for years to come, MCD stock may be worth a look. Here’s why…
McDonald’s sales in the last few years have been sluggish, as the company is battling the perception that its food is unhealthy and overprocessed, and the company has lost touch with its customers.
However, in May of last year, newly appointed CEO Steve Easterbook unveiled a turnaround plan to revive the business.
Since then, the company has cut several menu items in an attempt to speed up customer service, introduced a new, higher-quality burger (“Sirloin Third Pounder”), and announced that it would be removing antibiotics and other additives from its chicken in the U.S.
But it’s the introduction of its all-day breakfast menu in the U.S. last quarter that might be the first real step in reviving sales at McDonald’s.
Earnings for the quarter were a major victory, as the all-day breakfast menu helped power the company to an increase in global same-store sales of five percent over the previous year. U.S same-store sales saw even better numbers, growing 5.7% in the same period. (Source: “McDonald’s Reports Fourth Quarter and Full Year 2015 Results,” McDonald’s Corporation, January 25, 2016.) It’s now the second quarter in a row that McDonald’s has posted same-store sales increases.
McDonald’s stock is among the “dividend aristocrats,” which is a group of companies that have increased their dividend payouts every year for at least 25 years. McDonald’s easily bests that, having raised its dividend for 39 straight years.
Even during economic downturns, McDonald’s was able to keep increasing its dividend, which is great for income investors. During the financial crisis in 2009, McDonald’s was able to increase its dividend payout by 10% from the previous year. (Source: “McDonald’s Corporation Dividend Date & History,” NASDAQ, last accessed March 3, 2013.)
At its current price, McDonald’s stock yields 3.04%.
McDonald’s management consistently shows that it cares about creating value for shareholders. On top of raising the dividend every year, the company is also committed to buying back shares.
In the latest earnings call, CFO Kevin Ozan stated that the company is continuing to finish its $30.0-billion share repurchase program with plans to re-franchise 4,000 restaurants by the end of 2018.
The company is also planning to cut down on bloated management costs as well, announcing it will cut annual general and administrative spending by $500 million.
All of this should work to increase shareholder value.
The Bottom Line on MCD Stock
With the company’s track record for finding new ways to grow, its ability to dish out dividends year after year, and its commitment to creating shareholder value, McDonald’s stock might be worth a closer look for a spot in your portfolio.