Investors Take A Bite Of McDonald's

On Thursday, McDonald's (nyse: MCD - news - people ) said it would funnel more money back to shareholders by raising its annual dividend by 50%, to $1.50 a share. The increase is part of a plan to deliver between $15 billion and $17 billion in cash to investors over the next two years, the company said. The company's generosity was certainly good news for investors, as shares of the company soared 6.4%, or $3.24, to $54.44 in Thursday morning trading.

The world's biggest hamburger maker may have been founded over 50 years ago, but that doesn't make it a dinosaur stock: McDonald's shares are up 12% since mid-August. By introducing new menu options and aggressively courting business abroad, the fast food retailer has managed to re-energize its business model. The proof is in the numbers.

Earlier this week, McDonald's announced that same-store sales surged 8.1% in August--more than double the Street consensus (See: "McDonald's Is Lovin' Its Sale Of Boston Market" ). Many analysts were expecting sales to increase a more modest 2% to 3%.

McDonald's said the uptick was boosted by the popularity of its breakfast items and traditional staples, such as the Big Mac. Meanwhile, new meal items such as the snack wrap have also revitalized the company's image in the eyes of consumers. “It is important for McDonald’s to look like the trendy, Western eatery amongst young people, women and children in Europe and Asia. Specifically in Asia, rising urbanization opens the door for McDonald’s to attract a greater number of consumers,” Deutsche Bank analyst Jason West said.

Consumers around the world seem to be buying into the McDonald's brand. More than half its profits were realized abroad last month. Same store sales in Europe rose 6.1%, while sales in the Asia-Pacific region grew an eye-popping 12.4%.

Meanwhile, McDonald's is cleaning up shop at home. Earlier last month, the company sold its Boston Market chain to Sun Capital Partners, a private equity firm.

Many of Wall Street's analysts have rallied around the golden arches in recent months. A batch of them bumped up their price targets on Thursday. Deutsche Bank, Lehman Brothers, and UBS all raised their price target by a dollar, and all have a "buy" or "overweight" rating on the stock.

UBS analyst David Palmer said McDonald's strategy is "leading to a powerful combination of growth and income for investors." "Last night's move shines a bright light on the improved business to a broad large cap investor audience," he said. Palmer predicted that the company's earnings per share growth should continue to exceed consensus estimates.
Source: forbes.com