McDonald’s Hikes Dividend by 7%, Restarts Buybacks

McDonald’s (MCD) increased its quarterly cash dividend by 7% to $1.38 per share, implying an annual dividend of $5.52 per share, and also resumed its share repurchase program.

The dividend is payable on December 15 to holders of record on December 1, 2021. Shares of the American fast-food company gained 0.5% in the extended trading session on Thursday following the news. (See McDonald’s stock charts on TipRanks)

Markedly, the announcement resonates with the company’s strong track record of dividend hikes in the past and marks the 45^th increase since its first pay-out in 1976.

Further, the dividend increase will lead to pay-outs of more than $1 billion in Q4. The increase is driven by management’s confidence in its Accelerating the Arches growth strategy and its capability of generating long-term profits for its shareholders.

Oppenheimer analyst Brian Bittner recently reiterated a Buy rating on the stock with the price target of $270 (10.3% upside potential).

Bittner believes that consensus estimates appear too conservative regarding the recovery in the company’s International Operated Markets (IOM) segment.

He commented, “Since MCD’s late-July earnings call, our work shows continued improvements across France, Germany, Italy and Spain which account for ~40% of IOM profits. Following our full segment analysis, we hold an upside bias to Street’s 2-year SSS for IOM over the next two quarters of +4.3%/+4.7%.”

Consensus among analysts is a Strong Buy based on 22 Buys and 3 Holds. The average McDonald’s price target of $268 implies 9.5% upside potential to current levels.

MCD scores a “Perfect 10” on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.