McDonald's Shareholders Receive 49% Dividend Boost

Shares in McDonald's Corp., the world's largest restaurant company, rose 2.5% on the heels of an announcement Wednesday by the company that it was increasing its annual dividend to $1 a share, a 49% increase.

As part of a move to return as much as $10 billion to shareholders through dividends and buybacks, the 49% increase is higher than the company expected and significantly picks up the pace of the planned pay back scheduled in stages from 2006 through 2008.

Andrew Barish, analyst for Bank of America Securities, has a "buy" rating on McDonald's shares and said, "This increase is larger than we expected and reaffirms management's confidence in the strength of the company's operations and capacity to generate strong levels of cash flow.

Earlier in September, McDonald's offered a swap deal for shareholders to exchange McDonald's shares for those in Chipotle Mexican Grill Inc, a fast-food chain serving fresh Mexican food. McDonald's is divesting its interest in the chain. By the end of 2006, McDonald's expects to lower its outstanding shares by 5%, aided in part by the Chipotle share exchange offering.

McDonald's has aggressively introduced new services like cashless payments and extended hours to increase its customer base. The menu at the chain's more than 30,000 restaurants now includes entrée-sized salads, enhanced breakfast sandwiches, and a stronger blend of coffee.

Changes in the offerings come in part from calls on the part of customers for more health conscience choices. The company's television advertising campaign and the global "I'm Lovin' It" marketing campaign are further boosting company sales.

On Wednesday McDonald's shares were up 2 percent or 79 cents a share by mid-day on the New York Stock Exchange for a per share price of $39.85. Earlier in the session shares hit a high of $40.03, a level not seen since January 2000.