McDonald's (NYSE: MCD) has been one of the best performers in the Dow Jones Industrials in 2017, climbing more than 40% over the past 12 months. Long-term investors know that such performance is par for the course for the fast-food giant, which has produced average annual returns of roughly 14% over the past 40 years.
Equally impressive has been McDonald's commitment to shareholders who count on getting income from their investment through dividends. The company has not only paid dividends consistently for decades but has also offered steadily rising payouts over that time. Now that things are looking up for the restaurant chain, investors want to know if McDonald's will keep sharing its success through higher dividends. With that in mind, let's take a closer look at McDonald's and whether it's likely to raise its dividend in 2018.
Continue Reading Below
Dividend stats on McDonald's
The history of McDonald's dividends
As you can see above, McDonald's has more than four decades of dividend growth to its credit. The company has been a longtime member of the Dividend Aristocrats. Even better, McDonald's has generally been generous about the size of its dividend increases, typically avoiding the token boosts that some other members of the dividend-stock list have sometimes used to keep their streaks alive.
McDonald's made especially large dividend hikes during the 2000s. As you can see below, dividend growth accelerated in the middle part of the decade. While part of the rise shown in the chart reflects a shift from quarterly payouts to annual dividends, McDonald's didn't hold back in sharing its success with its shareholders.
Lately, the percentage increases that McDonald's has made to its dividends have been smaller than they were earlier in its history. Fundamental struggles caused the fast-food giant's earnings growth to slow, and that in turn reduced its capacity to make large dividend hikes in a sustainable way.
Yet earlier this fall, McDonald's gave investors a more than 7% dividend increase. CEO Steve Easterbrook attributed the boost to the solid financial condition that the fast-food giant is in right now, anticipating strong profits in the future. Smart business initiatives both on the expense management side and in driving new customer growth through attractive promotions and menu items have helped McDonald's shine.
Will McDonald's dividend go up again in 2018?
McDonald's expects those good times to continue. At an industry conference earlier this year, Easterbrook said that McDonald's expects to return between $22 billion and $24 billion to shareholders between 2017 and 2019 through a mix of dividends and share repurchases. Recent gains in comparable-restaurant sales, the rollout of mobile payment systems and digital products, and experiments like delivery show McDonald's commitment to keep thriving even in what has been a somewhat challenging environment in the restaurant industry lately.
Investors can expect McDonald's to do another dividend increase in 2018, likely coming late in the year. With those following the stock expecting roughly a 7% rise in earnings for the year, a similar-sized dividend increase of $0.07 per share to $1.08 quarterly would be consistent with McDonald's past practices and build on its reputation for treating shareholders well.
10 stocks we like better than McDonald'sWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now...and McDonald's wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of Nov. 6, 2017