McDonald’s to Return Cash to Shareholders and 1,500 Restaurants to Franchisees Over Next 3 Years


McDonald’s shares ticked lower Wednesday after the company announced its 3-year target for returning cash to shareholders.

Between 2014 and 2016 the fast food behemoth plans to return $18 billion to $20 billion to investors through a combination of quarterly dividends and share repurchases. This, the company said, represents a 10% to 20% increase compared to the prior three year period. McDonald’s noted it is basing the increase, in part, on re-franchising at least 1,500 restaurant by the end of 2016 mainly in its Asia/Pacific, Middle East and Africa (APMEA) division as well as in Europe.

“The actions we are taking to enhance long-term shareholder value fit squarely within our proven business model,” said Chief Financial Officer Pete Bensen in a statement. “Our 3-year cash return target is based on several activities including the significant free cash flow generated from our operations, as well as the use of cash proceeds from our debt additions and refranchising activity. Financial discipline has always been a cornerstone of McDonald’s strategic plan, and we will pursue these activities while maintaining appropriate levels of financial flexibility, liquidity and access to capital for the Company and the System.”

In its 2013 annual report McDonald’s reiterated a commitment to returning all free cash flow — cash from operation less capital expenditures — to shareholders. In 2013 the company returned $4.9 billion through $3.1 billion in dividends and $1.8 billion in share repurchases. In September 2013 McDonald’s increased its dividend by 5% to 81 cents a share — $3.24 annually. The company has increased its divided toward the end of each calendar year since 2008.

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SOURCE: Samantha Sharf

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