MCD and MMM Dividends are Covered

The season for reporting second quarter earnings is warming up. I hope to see somewhat better picture of the state-of-economy and who is coming out with flying colors. I am following few selected ones based on my holdings and/or my potential opportunities.

McDonalds Corporation (MCD): The 2Q09 earning per share was $0.98 (vs. $0.87 in 1Q09).

  • The key highlight was reduced overall profits on y-o-y basis (vs. $1.04 in 1Q08) due to fluctuations of exchange rates.
  • Quarterly dividend of $0.50/share is well covered with earnings. The quarterly payout ratio is 51%.

3M Company (MMM): The 2Q09 earning per share was $1.12 (vs. $0.74 in 1Q09).

  • The key highlights were increased EPS, reduced overall income, and reduced revenue.
  • Increased EPS seems to be due to controlled operating expenses.
  • Quarterly dividend of $0.51/share is well covered with earnings. The quarterly payout ratio is 45%.


AT&T Inc. (T): The 2Q09 earning per share was $0.54 (vs. $0.53 in 1Q09).

  • The key highlights were reduced overall profits on y-o-y basis (vs. 0.63 in 1Q08) and reduced revenue.
  • Quarterly dividend of $0.41/share is barely covered with earnings. The quarterly payout ratio is close to 76%.
  • The payout ratios have increasing trends. Is this a warning sign?


United Parcel Service Inc. (UPS): The 2Q09 earning per share was $0.44 (vs. $0.40 in 1Q09).

  • The key highlights were reduced overall profits on y-o-y basis (vs. 0.85 in 1Q08) and reduced revenue.
  • Quarterly dividend of $0.45/share is not covered with these earnings. The quarterly payout ratio is more than 100%.
  • The quarterly payout ratios have been above 100% for two quarter in a row now.
  • Expect dividend cuts for UPS.


MCD and MMM continue to show strengths in their ability to manage during the downturn. Would you be investing in them?

One Response to “MCD and MMM Dividends are Covered”

  1. In the case of AT&T, its free cash flow for 1Q ’09 is about 1.5 times its net income for the same quarter. Although 2008’s and ’06’s FCF was only slightly abone ’08’s earnings, 07’s and ’05’s were also well above net income.

    On the other hand, 3M’s FCF is often below its earnings. On these grounds I would have to second your opinion about 3M’s dividend, but demur regarding your opinion of AT&T’s dividend.

    Strangely, AT&T yields 6.44% while 3M yields only 2.94%. I suppose 3M is one best left to the growth guys…

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