1. Team 6: Hui Lin Tan / Alejandro Gaviria / Carlos Velasquez / Cristiano Casagrande / Mario Isaac / Juan Diego Cordon

2. Founded in 1940 by Dick and Mac McDonald
Self service restaurant
Drive-In

4. 21,586
22,787
23,522
22,745
24,075
27,006
27,567
28,106
27,441
25,413
2,873
2,335
4,313 4,551 4,946
5,503 5,465 5,586
4,758 4,529
0
5,000
10,000
15,000
20,000
25,000
30,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
REVENUES & NET INCOME (US$ million)
-2.4%
-8%
-15% -4.8%

5. TURNOVER PLAN HIGHLIGHTS
- Improve food quality
- Service leadership development
- Savings in G&A expenses
- Return cash to shareholders
- Refranchise its own restaurants
- Financial discipline

6. The fast food giant issued
more debt to fund the US$
10B return of cash to
shareholders.
BBB+
A-
A May 2015
Nov2015

7. ROYALÉ WITH CHEESE!!!

9. DIVIDENDS, SHARES REPURCHASES & STOCK SPLITS
McDonald's has raised its dividend each year since paying its first dividend in 1976.
From 2002 to 2012 (10% every year). Last 3 years (5%)
McDonald’s remains committed to returning excess cash to shareholders through
dividends and share repurchases.
Since going public in 1965, McDonald's has executed twelve
stock splits.
“An investment of $2,250 in 100 shares in
1965 is worth approximately $7.0 million now.”

10. S&P 500 Dividend Aristocrats
25 or more consecutive years
of dividend increases

11. 1,217 1,766 1,823 2,236 2,408 2,610 2,897 3,115 3,216 3,230
1,984
2,805 3,371
2,465 2,235 3,029
2,287
1,545 2,963 5,782
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Dividends Change in Capital Stock Free Cash Flow
DIVIDENDS & STOCK REPURCHASES VS. FREE CASH FLOW (US$ million)

12. DEBT TO EQUITY RATIO
55 53 76 75 79 87 89 88 117 340
0
100
200
300
400
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
111% 196% 120% 103% 94% 102% 95% 83% 130% 199%
0%
50%
100%
150%
200%
250%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
DISTRIBUTION RATIO

13. WHY IS MCDONALD’S DOING THIS?
McDonald’s wants to keep their stock price high, an activity that
has become the major focus of its corporate strategy over the
past decade.
“McDonald’s has to do more than
manipulate its stock price”
William Lazonic
Harvard Business Review

14. RECOMMENDATIONS

15. REEVALUATE DISTRIBUTION POLICY
Leverage
Rating
Financial Risk
WACC
Profitability
Growth
Firm Value

16. Step 1: Forecast results for future needs based on different distribution scenarios
• Revenues and net income
• Capital expenditures needs
• Working capital variations

17. Step 2: Align board of directors and senior management with new redistribution policy
• Continue paying dividends
• Gradually stop stock repurchases

18. Step 3: Communicate to investors in a delicate way to prevent adverse reaction
• Understand the profile of McDonalds’s investors

19. Gain confidence of debt holders. Regain A rating.
Less risks would lead to less cost of debt. Would increase
value of the firm. Good for the owners.
Stop the historical growth of dividends.
Anger investors. Possible shock in the stock
price in the short term.
POSITIVE OUTCOMES
NEGATIVE OUTCOMES

20. To protect the firm´s sustainability, McDonald’s needs to be careful in managing their
capital structure. If they continue with the current policy on distributing cash to
shareholders, the financial risk will continue increasing exponentially.

21. Team 6: Hui Lin Tan / Alejandro Gaviria / Carlos Velasquez / Cristiano Casagrande / Mario Isaac / Juan Diego Cordon