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Why Did McDonald's (MCD) & Starbucks (SBUX) Stock Jump Friday?

Benjamin Rains
Updated

Shares of both McDonald's MCD and Starbucks SBUX surged Friday. MCD stock jumped on the back of a dividend hike, while SBUX climbed for less obvious reasons.

McDonald's

McDonald's announced on Thursday that its board approved the firm’s 42nd consecutive annual dividend hike. The fast-food giant lifted its quarterly dividend from $1.01 to $1.16 per share, which marked a 15% boost. The dividend will be payable on December 17 to shareholders of record as of December 3.

McDonald's cited corporate tax cuts and heightened capital flexibility based on positive business developments as the primary reasons for the 15% quarterly dividend increase. “Our substantial cash flow enables us to invest in the business to drive growth under our Velocity Growth Plan,” CEO Steve Easterbrook said in a statement.

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The company launched its new long-term growth plan in March 2017. The more consumer-facing initiatives are to enhance the fast-food chain’s digital capabilities such as order kiosks and dive into delivery. Plus, McDonald's plans to have most of its traditional free-standing U.S. restaurants “modernized to reflect the Experience of the Future by the end of 2020.”

Looking ahead, McDonald's now expects to see systemwide sales growth between 3% to 5% starting in 2019. The restaurant giant also projects an operating margin in the mid-40% range, while also expanding its EPS growth in the high-single digits.

Shares of McDonald's surged over 2% Friday following the dividend announcement. Investors will see that MCD stock has outperformed its industry, which includes the likes of Dunkin' DNKN, YUM! YUM, and Domino's DPZ, over the last two years. McDonald's stock has also outpaced the S&P 500 over this stretch, but MCD stock has moved mostly sideways for much of the last year.

 

Starbucks

Moving on, shares of SBUX jumped over 1.8% Friday without any significant news to speak of. This means investors are likely looking down the road and think that some of the coffee powerhouse’s initiatives might pay off.

Last week, Starbucks announced its commitment to have 10,000 eco-friendly stores worldwide by 2025. The firm’s new “Greener Stores” aim to reach performance-based standards of powering locations with 100% renewable energy, which Starbucks said could “save 25% to 30% on energy and water use and more.”

Along with a commitment to operating and opening more sustainable stores, which could end up saving Starbucks money, the coffee chain is committed to Chinese expansion. This includes a partnership Chinese e-commerce giant and Amazon AMZN rival Alibaba BABA to help boost its sales and standing in the country. Starbucks has said it plans to add 600 new stores per year in Mainland China through 2022 to double its locations to 6,000 total stores in 230 cities. 

Starbucks needs to continue to come up with innovative ways to expand and bring in customers as its major growth days seems to be over at this point. Plus, the coffee giant could soon face increased competition from Coca-Cola KO, which is set to purchase UK coffee giant Costa for $5.1 billion as it tries to expand its portfolio beyond sugary drinks, and other smaller players.

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