To the surprise of many (including mine, even though I purchased some shares three weeks ago), McDonald's announced last week that the company was increasing its quarterly dividend from $0.50 to $0.55, a 10% increase.
Although the market is taking this increase well (the stock moved up by about 4% since), it is apparent that some people are questioning this increase. The company has fared well during the ongoing recession, but has really not improved earnings. So is increasing the dividend a wise move? Only time will tell.
Personally, I believe that over the long term things will work out. The move may have been a bit premature, and designed as a way to reassure investors that the company is confident about the future. After all, the stock hasn't moved much during the market comeback during the last 6 months, so maybe the company felt it needed to send a message to investors: "We still make money for you, one way or another." Maybe this move will simply mean that next year's dividend increase will be smaller. It all evens out in the long term.
In the meantime, I will simply keep collecting those dividends in my RRSP.
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