Are you an investor that wants McDonald’s to spin off its real estate assets? Well, you’re not in luck anymore.
McDonald’s CEO Steve Easterbook released the company’s decision on REITs and plans to move forward. The world’s largest fast food chain has opted out of pursuing a Real Estate Investment Trust.
The risk of REIT for McDonald’s is too large in comparison to the potential benefits. REITs are a way for individual investors to earn a share of the income produced through commercial real estate ownership. With an REIT, stockholders would earn a share of the company’s income produced through the real estate investment without actually buying property.
While it was hoped the company’s tax bill would reduce by $1 billion dollars through real estate investment, McDonald’s instead plans to boost dividends and stock buybacks in order to return more cash for shareholders. To do so, the company will take on $10 Billion in debt.
McDonald’s also plans to raise quarterly dividends to 89 cents per share from 85 cents.
Last month, the company’s sales grew for the first time in more than a year. CEO Easterbrook has confidence the company will continue to expand and create more sales.
Plans for 2016: expect sales to increase 3% to 5% and growth in operating income from 5% to 7%.
Easterbrook told investors they plan to expand the number of franchise operated stores and would like 95% of McDonalds to be independently operated.
McDonald’s prefers to keep control of its real estate assets. Rents from franchisees makes up more than 22% of the company’s total revenue.
To those investors wanting the company to spin off into real estate investment trust, Sorry.