09-18-2013, 09:20 PM
Shawnjeffrey had the scoop over in the other McDonalds thread – MCD announced the Q4 dividend today at 81 cents, which is up from 77 cents in recent quarters. But I thought this would be a good moment to start a new thread on MCD with current thoughts on MCD's future.
I think it is an ok raise, but not great. When you compare 81 to 77 cents, it does feel like a pretty small 5 percent raise, which was the widely reported number today. But the story is a little more rosy when you look at it year over year. In 2012, MCD paid out a total of $2.87. With this raise, the total payout per share in 2013 will be $3.12. By my math, that is a dividend raise of 8.71 percent year over year. Not too bad -- a lot better than 5 percent, anyway.
However, when looking forward to full year 2014, this year’s small-ish raise will result in a smaller year over year raise compared to 2013, unless the Q4 dividend next year (in 2014) is HUGE. Which doesn't feel too likely. Even if we got a very healthy 10 cent raise late in 2014, the dividend growth from 2013 to 2014 would still only be only about 7 percent.
So it looks like the dividend growth rate for MCD may be slowing down significantly here. Especially compared to the roughly 14 percent dividend growth rate we've enjoyed from MCD over the past 5 years and the 10 to 13 percent raises of the past few years.
It does make me a little less enthusiastic about acquiring shares with new money (other than reinvested dividends), but I still think that MCD is an excellent company with a safe future. And with this raise, at today's close you're getting a yield slightly over 3.25 percent to hold one of the biggest and best run global companies there is.
Thoughts?
I think it is an ok raise, but not great. When you compare 81 to 77 cents, it does feel like a pretty small 5 percent raise, which was the widely reported number today. But the story is a little more rosy when you look at it year over year. In 2012, MCD paid out a total of $2.87. With this raise, the total payout per share in 2013 will be $3.12. By my math, that is a dividend raise of 8.71 percent year over year. Not too bad -- a lot better than 5 percent, anyway.
However, when looking forward to full year 2014, this year’s small-ish raise will result in a smaller year over year raise compared to 2013, unless the Q4 dividend next year (in 2014) is HUGE. Which doesn't feel too likely. Even if we got a very healthy 10 cent raise late in 2014, the dividend growth from 2013 to 2014 would still only be only about 7 percent.
So it looks like the dividend growth rate for MCD may be slowing down significantly here. Especially compared to the roughly 14 percent dividend growth rate we've enjoyed from MCD over the past 5 years and the 10 to 13 percent raises of the past few years.
It does make me a little less enthusiastic about acquiring shares with new money (other than reinvested dividends), but I still think that MCD is an excellent company with a safe future. And with this raise, at today's close you're getting a yield slightly over 3.25 percent to hold one of the biggest and best run global companies there is.
Thoughts?