McDonald's Resets Dividend Leadership in Fast Food (MCD, YUM)

Over $2.5 billion served… that is the new annualized dividend payment from McDonald’s Corporation (NYSE: MCD).  The Golden Arches just announced that its board of directors declared a $0.61 per share quarterly cash dividend.  This is on the heels of a recent dividend hike from rival YUM! Brands Inc. (NYSE: YUM). This new dividend rate is an increase of 11% increase over the company’s prior $0.55 dividend over the last four quarters.

McDonald’s noted that it now expect the 2010 total cash returned to shareholders (buybacks and dividends) to be roughly $5 billion.  More importantly, even if unsurprising, the company plan remains “committed to maintaining financial discipline and enhancing shareholder value.”

The first priority is to reinvest in the business by allocating capital where it can drive sales and cash flow and to generate strong returns.  As far as whether future dividend hikes can be made, that easily seems the case down the road as it was listed as “After these investment opportunities, we expect to return all of our free cash flow to shareholders over the long term through dividends and share repurchases.”

After looking through the data, it appears that McDonald’s has continued to raise its dividend every year since first paying its dividend back in 1976.

The new $2.44 annual payout generates a yield of 3.2% based on a $75.13 close on Thursday versus a 52-week trading range of $55.50 to 76.26.  The current yield for Yum! Brands (NYSE: YUM) is 2.2%, and Yum!’s $46.47 close compares to a 52-week range of $32.49 to $46.91.

JON C. OGG