Dividend Increases Quietly Continue (MCD, YUM)
Jim Trippon: The dividend hits keep coming, as 2012 continues to be a good year, quietly or otherwise, for dividends. Two fast food giants, McDonaldâ€™s (NYSE:MCD) and Yum! Brands (NYSE:YUM) announced dividend increases. McDonaldâ€™s recently announced an increase of 7 cents in its quarterly dividend payment, from 70 cents to 77 cents per share, a 10 percent increase, while Yum! raised its quarterly payment 18 percent, from 28.5 cents to 33.5 cents.
McDonaldâ€™s Five Year Chart
Source: Yahoo Finance
More Fast Food Cash
Yum! Brands will now pay an annual dividend of $1.34 per share. With its recent stock price at $68 per share, close to the middle of its 52-week trading range, this is a current yield of 1.97 percent. Although the yield is less than McDonaldâ€™s, and doesnâ€™t look like a whopping amount, Yum! is still a potent grower long term in the global restaurant scene, with nearly 40,000 restaurants in 120 countries. The owner of KFC, Taco Bell, and Pizza Hut has a significant presence and much of its global business now in China. It has raised its dividend eight years in a row and has grown its dividend payments by nearly 20 percent each year in the last five years. The company has a target of paying out 35 percent to 40 percent its net income each year.
Yum! Brands Five Year Chart
Source: Yahoo Finance
The announcement for McDonaldâ€™s and Yum! both pushed their stocks up slightly, but didnâ€™t make for huge rallies in either name. Dividend investing is for many a long-term game, though, so most shareholders arenâ€™t too worried about whether thereâ€™s a quick jump in the stock price or not. McDonaldâ€™s is a stock that is held for a combination of stable growth and its underrated dividend, while Yum! has been historically more of a growth stock recently, though its growth rate is slowing down some, especially in this economy. While investors donâ€™t hold Yum! primarily for its income, the increasing dividend is a nice bonus for investors and the growth of the payouts adds to that each year.
McDonaldâ€™s, on the other hand, has had a few problems recently with questions about product quality, currency exchange rates, its European business, as well as the belief by some analysts that higher beef prices due to the drought and lower crop yield in the US will impact it going forward. McDonaldâ€™s, though not impervious to such problems, has historically and certainly in the last decade or so, shown a high aptitude to solve problems and adapt, which is in some ways what still sets it apart from its competition. Although the financial media has been focusing on the poor performance of McDonaldâ€™s stock this year, as it has lagged Yum! Brandsâ€™ performance by more than 20 percent, long term bets against McDonaldâ€™s arenâ€™t necessarily wise. The dividend increases by both companies shows that their managements are still confident going forward, even in this lackluster economy.
McDonaldâ€™s , Yum! Brands & Dow YTD
McDonaldâ€™s and Yum! should be looked at in the context of whatever portfolio strategy an investor has rather than in isolation. Simply put, it wouldnâ€™t be right to criticize an investor for buying or not buying either of these stocks simply on their dividend or yield profiles without knowing how these stocks fit into the overall portfolio. And as we pointed out, these stocks are each a bit different in their makeup. McDonaldâ€™s is more likely the type of investment for the core of a group of long term holdings for an investor, rather than a pure dividend play or a trade, while Yum! showed a lot of rapid growth in recent years, so it was more likely in a growth segment of investorsâ€™ portfolios. Dividend paying stocks have versatility that theyâ€™re not often given credit for, with an allure beyond just income.
Jim Trippon, founder ofÂ Trippon Financial Media, Inc., is a maverick that has dedicated his investment career to helping investors make smarterÂ financialÂ and stock selection decisions. Trippon,Â an internationally recognized expert on global andÂ valueÂ investing, has a deep passion for finding hidden value in globalÂ equityÂ markets. Trippon started his career as a financial statement examiner with Price Waterhouse which allows him to dissect a public companyâ€™s financialÂ picture and better identify hidden gems. Tripponâ€™s savvy approach toÂ investingÂ and personalÂ financeÂ makes him in high demand by major media who seek his unique perspective on stocks and global economics. He hasÂ been featured in top publications both in the US and abroad includingÂ Bloomberg, Investorâ€™sÂ BusinessÂ Daily, The New York Times, The International Herald Tribune,Â StockÂ FuturesÂ and Options Magazine, The Bull and Bear Financial Report and he regularly appears on broadcast television including as an on air contributor to CNBC, CNN, Fox Business, and Fox News.
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