McDonald's Not Pursuing REIT; Will Raise Dividend And Bet On Refranchising Instead
Shares of McDonald's Corporation (NYSE: MCD) were halted on Tuesday afternoon, ahead of the company’s investor meeting, held at 1:00 p.m. ET. The stock resumed amid volatile trading, and is up on the session.
About 30 minutes into the investor meeting, the company issued a press release detailing its turnaround plan.
The company announced a 5 percent increase in its dividend yield for the fourth quarter, translating into a quarterly dividend of $0.8925 per share. McDonald's is planning to raise its cash return to shareholders target to ~$30 billion over the three-year period ending in 2016.
Management is also planning to refranchise 4,000 restaurants by 2018. Prior guidance aimed at refranchising only 3,500 stores. The company, which is currently 81 percent franchise-owned, will be 95 percent franchise-owned in less than three years.
"My priorities for McDonald's as a modern, progressive burger company are three-fold: driving operational growth, creating brand excitement and enhancing financial value," CEO Steve Easterbrook said. "Our turnaround depends on this: we must run great restaurants each and every day," he added.
Although investors were pressing for it, the company will not pursue a REIT for now; management believes this is best for shareholders. Easterbrook says this is due to risk-reward.
"We have concluded that any potential value creation from a REIT is out-weighed by the significant financial and operational risks to our business and the continued progress of our turnaround, and we do not believe that pursuing a REIT would be in the best interest of McDonald's at this time," he explained.
Shares of McDonald's are now trading at an all-time high near $115 per share.
Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.
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