Anticipating Dividend Gains: McDonald’s Positioned for Potential Surge
This morning a “Potential Dividend Run Alert” was issued for McDonald’s Corp (NYSE: MCD) through our DividendChannel.com Dividend Alerts service, a valuable free email notification feature. Let’s dive into what this means.
Understanding the Dividend Run Concept
What exactly is a “Dividend Run”? This concept, which originated from a ValueForum conference, revolves around how a stock behaves on its ex-dividend date.
The ex-dividend date is significant because it marks the last day a stockholder can buy shares and receive the upcoming dividend. If you buy on or after this date, you won’t get that payment. Typically, stock prices are expected to drop by the dividend amount on this day. For instance, if McDonald’s is paying a $1.77 dividend and you buy the stock after this date, you would effectively be paying $1.77 more than necessary.
Market Trends Prior to Ex-Dividend Dates
If stocks tend to drop by the dividend amount on the ex-dividend date, one could argue that they should rise beforehand, building anticipation for the cash payout. If stock prices only decreased without ever rising, investors would watch the value of their shares diminish over time, even as the company remains profitable and continues paying dividends. Thus, one would expect a natural buildup of interest leading to a “Dividend Run.”
Investors have different strategies when it comes to capturing these potential gains. Some prefer to buy and sell on specific dates, while others may opt for dollar cost averaging or buy shortly before the ex-dividend date to receive the payout, then sell afterward. Another common approach is selling the day before the ex-date to maximize capital gains, often aiming for a purchase around ten trading days prior.
Examining McDonald’s Recent Dividend History
Take the $1.67/share dividend that went ex-dividend on 09/03/24. On the last trading day before this date, shares of MCD closed at $288.66. Looking back ten trading days earlier, on 08/16/24, shares were at $278.49. This pattern shows a price increase of $10.17 leading up to the dividend payout.
When analyzing McDonald’s last four dividend payments, this strategy yielded capital gains exceeding the dividend payouts three out of four times, resulting in a total capital gain of $12.52. In contrast, the total dividends paid during that period amounted to $6.68. Here’s a closer look:
| Ex-Dividend | ——Price 2 Weeks Prior—» | ——Price 1 Day Prior—» | Run Gain/Loss | |||
|---|---|---|---|---|---|---|
| 09/03/24 | 1.67 | 08/16/24 | 278.49 | 08/30/24 | 288.66 | +10.17 |
| 06/03/24 | 1.67 | 05/16/24 | 273.51 | 05/31/24 | 258.89 | -14.62 |
| 02/29/24 | 1.67 | 02/13/24 | 287.11 | 02/28/24 | 295.19 | +8.08 |
| 11/30/23 | 1.67 | 11/14/23 | 271.49 | 11/29/23 | 280.38 | +8.89 |
| Div Total: | 6.68 | “Divvy Run” Total: | +12.52 | |||
Looking Ahead: Upcoming Dividend Details
McDonald’s Corp (NYSE: MCD) will soon go ex-dividend for its latest dividend of $1.77/share on 12/02/24, with payment following on 12/16/24. This quarterly dividend is one to watch for investors seeking dividends.
As the saying goes, past performance is never a guarantee of future returns. However, for investors interested in Dividend Runs, MCD remains a promising option, currently boasting an implied annual yield of 2.42%.
Stay tuned for more Dividend Run prospects, and feel free to sign up for our free Dividend Alerts service at DividendChannel.com to receive updates directly in your email inbox.
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
