Has McDonald’s Been Able To Appease Its Investors Amidst Turmoil In Its Topline?
- Despite seeing a shift in its operating structure towards a 100% franchise-based model which led to a slump in its revenues, and a slowdown in the U.S. restaurant industry, McDonald’s (NYSE:MCD) has managed to keep its investors happy. Its return on equity ratio increased in 2015, while it paid out higher dividends to its common shareholders.
- McDonald’s revenue fell in the period between 2013-2015 due to the acceleration in the pace of re-franchising its company-operated restaurants. The shift towards a 100% franchisee model has negatively impacted the consolidated revenues of the company as company-operated sales are being replaced by franchised sales, where the company only receives royalty payment based on a percentage of sales.
- Consequently, McDonald’s net income also decreased during the period. Despite this fall, we saw return on equity (ROE) increase to 45% in 2015.
- The company continued to pay stable dividends to its shareholders even as its net income suffered from a changing revenue mix. As a result, dividends as a percentage of earnings, or dividend payout ratio, of the company grew to 71% in 2015.
- Further, the company’s dividend yield, i.e., dividend as a percentage of stock price, also went up to 3.7% in 2015.
- The return ratios indicate that McDonald’s has strong fundamentals and continues to have confidence in its business even in the face of a slowing restaurant industry in the U.S.
Have more questions on McDonald’s? See the links below.
- McDonald’s Versus Burger King: Whose Franchisees Perform Better?
- McDonald’s Slows Down In Q2’16, Despite Growth In Comparable Store Sales
- McDonald’s Q2 FY 2016 Earnings Preview: Investment In Quality, All Day Breakfast To Drive Revenues
- McDonald’s 2016 Revenues To Decline YoY Despite Improvement; To Pick Up Pace Thereafter
- What’s McDonald’s Fundamental Value Based On Expected 2016 Results? (Updated After Q1 2016)
- By What Percentage Have McDonald’s Revenues And EBITDA Grown Over The Last Five Years?
- What Is McDonald’s Revenue & EBITDA Breakdown? (Updated After Q1 2016)
- How Has McDonald’s Revenue And EBITDA Composition Changed Over 2011-2015?
- McDonald’s Q1 FY 2016 Earnings Preview: All Day Breakfast To Drive Comp Sales In The US
- Where Will McDonald’s Revenue And EBITDA Growth Come From Over The Next Three Years? (Updated After Q1 2016)
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Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for McDonald’s
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