McDividends - McDonald's (MCD)

Fast food giant McDonald's (MCD) has its detractors, but there is no question that the company has proven its ability to generate long-term dividends and wealth for its shareholders.

 

An investment of $2,250 in 100 shares of the company in 1965 had grown to 74,360 shares worth over $4.6 million as of year-end market close on December 31, 2009. This is courtesy of 12 stock splits and a dividend which has risen every single year since 1976.

 

With wealth creation of that sort, does it matter what the burgers taste like? Apparently not: the brand and the food are growing its footprint across the globe.

 

McDonald's (MCD) trades on a dividend yield of 3.09% and a price to earnings (PE) multiple of 17.4% and has recently been selected for inclusion in the Dow Jones World and Dow Jones North America Sustainability Indexes for the sixth consecutive year. Inclusion in these indices is a thumbs up from the investment community to say that McDonald's (MCD) is managed with long-term shareholder wealth in mind.

 

Reporting third quarter earnings recently McDonald's (MCD) announced that it had returned $1.4bn to shareholders over the quarter and delivered a 5% increase in revenue and a 10% increase in net income. Revenue for the quarter came in at $6.3bn while net income was $1.38bn.

 

For the third quarter, the company grew comparable sales and customer visits around the world and delivered increased profitability. The quarterly cash dividend rose by 11% to $0.61 per share effective for the fourth quarter 2010.

 

While McDonald's (MCD) was strong in its traditional US base, it also saw improved operating performance from its exposure to Asia and other emerging markets which delivered a 22% increase in earnings. This included strong growth from its operations in Japan, China and Australia. October global comparable sales are expected to increase 5% to 6%.

 

One of the key tenets of dividend investing is that it’s not the big and spectacular that builds wealth, but rather a repeatable formula, consistent dividend growth on the back of solid cash flows and strong brands. McDonald's (MCD) has proven it has all of the above and has the hallmarks of being a quality dividend play for the patient investor for years to come.