McDonald’s hikes dividend as it cools on REIT plan
McDonald’s says it will not pursue spinning off its real estate assets.
The world’s largest hamburger chain, which is in the midst of a turnaround plan, had been considering forming a real estate investment trust (REIT) partly because of the tax advantages it could provide.
But chief administrative officer Pete Bensen said during McDonald’s investor meeting Tuesday that any possible value that could have been created with the REIT was outweighed by “significant financial and operational risks” to the business and the progress of its turnaround.
McDonald’s Corp. also said it is now looking to refranchise 4,000 restaurants, up from a prior target of 3,500 restaurants. The Oak Brook, Ill.based company said this puts it in position to meet its new longer-term goal to be 95-per-cent franchised.
McDonald’s is making a number of changes in the U.S. that it hopes will set the stage for a turnaround. Tweaks to food preparation included toasting buns longer and searing burgers to make them juicier. For its Egg McMuffins, the company switched back to butter and regular English muffins, instead of margarine and whole-grain muffins.
The company also said Tuesday that its board approved a 5-per-cent increase in its dividend. McDonald’s will pay a quarterly dividend of 89 cents on Dec. 15 to shareholders of record Dec. 1.
Looking ahead, the chain said it still expects sales at established locations worldwide to rise for the final three months of the year. That’s a key metric that strips out sales from locations that have opened or closed in the past12 months. In the third quarter, sales at established U.S. locations edged higher, snapping a streak of about two years of quarterly declines.
McDonald’s expects sales growth of 3 to 5 per cent next year and capital expenditures of about $2 billion, to be spent on opening about 1,000 new restaurants and reinvesting in existing locations.