McDonald's beefs up its shareholder dividend by 10 percent
There are not many public companies, large or small, that are rolling in cash. Fewer want to send that money back to their shareholders. A number of America's largest corporations have billions of dollars on their balance sheets and this has caused people who own the stocks to complain. What does Apple (NASDAQ:AAPL) need with over $20 billion in cash and short-term investments when it makes well over $1 billion each quarter? That cash won't go toward M&A. Apple never buys anything.
McDonald's (NYSE:MCD) is at the other end of the spectrum from Apple. It has built an effective mechanism for getting money back to shareholders through stock buy-backs and dividend increases. The company has a healthy 3.6 percent yield, and on September 24 it increased its dividend by 10 percent to $.55 cents a share.
The company is proud of itself for the move, and why not? It is operating in an economic environment where many public companies have been battered, and where a large number that do deliver dividends have cut them to preserve cash.
Making sure that its good actions were noticed, McDonald's Chief Executive Officer Jim Skinner said, "So far in 2009 we've returned nearly $4 billion to shareholders through dividends and share repurchases, bringing total cash returned since the beginning of 2007 to about $15.5 billion. With today's dividend increase, we expect to end the year near the high end of our three-year, $15 billion to $17 billion total cash return target." For a company with a market capitalization of $62 billion, that is a big return.
Some investors may stick with Apple because they think the stock will double from its current price due to huge sales of its relatively new iPhone. That may be true, but the handset's track record is unproven. People have been buying hamburgers for a long time, and they've been buying them at McDonald's for decades. Shareholder can take that to the bank.
Douglas A. McIntyre is an editor at 24/7 Wall St.