Markets & Finance

McDonald's Supersizes Its Dividend


McDonald's (MCD) shares rose Sept. 27, when the fast-food chain said it plans to hike its annual dividend from 67 cents to $1.00 per share.

The move made McDonald's the 37th largest dividend payer in the S&P 500 Index. After the news Oak Brook, Ill.-based company's share price gained 1.3% to $39.58 per share in afternoon trading on the New York Stock Exchange.

The fast food chain said its board has approved the dividend, totaling about $1.2 billion, which will be payable on December 1, 2006 to shareholders as of November 15, 2006. It says shares outstanding at the end of 2006 will decline by about 5% from year-end 2005.

"Today's nearly 50% boost in the dividend reflects confidence in the ongoing strength of our business and the reliability of our substantial cash flow," said Jim Skinner, McDonald's Chief Executive Officer, in a press release.

McDonald's now expects to return at least $10 billion to shareholders through dividends and share repurchases in 2006 through 2008, as its available cash grows.

McDonald's has raised its dividend every year since paying its first one 30 years ago. The long-time company quadrupled the dividend from 23.5 cents per share in 2002 to $1.00 per share in 2006.

The size of the dividend hike was the surprise in the announcement, said Howard Silverblatt, an analyst at Standard & Poor's Corp. (S&P, like BusinessWeek.com, is owned by The McGraw-Hill Companies.)

McDonald's isn't the only company to raise its dividend in recent months; others include the beverage maker PepsiCo (PEP), retailers Target (TGT) and Wal-Mart Stores (WMT), and the financial services firm State Street (STT).


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