Should McDonald’s Corporation (NYSE:MCD) Pursue Investments Or Buybacks?


McDonald’s Corporation (NYSE:MCD) may have to channel a great chunk of its earnings back into the business in the form of new investments, instead of carrying out big payouts. Paying out a total of $6.5 billion to shareholders last year while the company earned $5.5 billion might not have been the best of moves according to economics professor Josh Mason.

Competition Struggles

McDonald’s Corporation (NYSE:MCD) finds itself in a landscape that has changed a great deal in the recent years thanks to the emergence of more players all gunning for market share. The emergence of the likes of Chipotle Mexican Grill, Inc. (NYSE:CMG) has brought another form of challenge in the form of stiff competition; something MacDonald’s is struggling to cope with. The fast food giant has failed a great deal in attracting the millennials to its stores, most of whom have shifted their allegiance to its rivals

Kevin O’Leary of the O’Leary Financial Group believes McDonald’s Corporation (NYSE:MCD) should use part of its cash to get the right people and strategies that can take the company to another level amidst the stiff competition.

Need For Dividends And Buybacks

Cutting dividend at the moment in pursuit of other investments may not be the right move according to O’Leary as this may result in big institutional investors dumping their stakes in the company. The company has already announced a $0.85 per share dividend to be paid on June 15, 2015 something that is sure to go well with shareholders.

Recently appointed CEO, Steve Easterbrook finds himself in a tricky position in the attempt of enhancing the company’s sales and investments while keeping shareholders happy through buybacks. Earlier in the month the CEO announced plans to return up to $9 billion to investors awaiting to see how this will be made possible as the fast food chain continues to struggle on the sales front.

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