I think one of the most important variables income investors should consider when developing a dividend based strategy is the trading of shares at or near a company's ex-dividend date. According to Investopedia, "on the ex-dividend date the person who owns the security will be awarded the payment, regardless of who currently holds the stock." After the ex-date has been declared, the stock will usually drop in price by the amount of the expected dividend. That said there are two companies that will be going ex-dividend on August 30th investors should consider.
McDonald's (MCD), which closed trading on Wednesday at $89.65/share will be going ex-dividend at the close of trading on Thursday, August 30th. The Oak Brook, Illinois-based firm, currently yields 3.10% ($0.88), and together with its subsidiaries, franchises and operates McDonald's restaurants primarily in the United States, Europe, the Asia Pacific region, the Middle East, and Africa. The company's restaurants offer hamburgers and cheeseburgers, Big Mac, Quarter Pounder with cheese, Filet-O-Fish, chicken sandwiches, chicken McNuggets, chicken selects, snack wraps, French fries, salads, shakes, desserts, sundaes, soft serve cones, pies, cookies, soft drinks, coffee, and other beverages, as well as full or limited breakfast menu.
I think the one of the key long-term catalysts for MCD is going to be margins and how they outpace some of the competition within the restaurant, and more specifically the fast-food restaurant sector. Over the last 12 months, MCD has demonstrated a profit margin of 20.03% and an operating margin of 30.61%, whereas Yum! Brands (YUM) has only managed to demonstrate a profit margin of 11.49% and an operating margin of 15.99%.
Kellogg Company (K), which closed trading on Wednesday at $51.42/share will be going ex-dividend at the close of trading on Thursday, August 30th. The Battle Creek, Michigan-based firm, which currently yields 3.40% ($1.76), together with its subsidiaries, manufactures and markets ready-to-eat cereal and convenience food products primarily in North America, Europe, Latin America, and the Asia Pacific. It primarily produces snacks and frozen food, including cookies, crackers, toaster pastries, cereal bars, fruit-flavored snacks, frozen waffles, and veggie foods.
One of the most important catalysts, in my opinion, for long-term investors looking to establish a position in K is going to be the company's margins and how they outpace some of the competition within the consumer goods sector, and more specifically how they outpace some of the other cereal companies. Over the last 12 months K has demonstrated a profit margin of 8.92% and an operating margin of 14.62%, whereas Danone (OTCQX:DANOY) had only managed to demonstrate a profit margin of 8.41% and an operating margin of 13.99%.
Potential investors looking to establish a position in either MCD or K should do so with a small to moderate position and add to that position as dividend and earnings announcements approach. In my opinion both companies should be heavily considered from an income standpoint since both companies have yields that are higher than 3.00%.