Are you looking for more dividend income rather than growth for your portfolio at the moment? Or perhaps you’re after consistent dividend growth instead of just a high initial yield?
If so, consider McDonald’s (New York Stock Exchange: MCD).
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With over 45,000 outlets worldwide, McDonald’s sits at the top as the largest fast food chain globally. At a glance, it might seem that’s all there is to it.
However, a deeper look reveals that McDonald’s also stands out as the largest franchisor by revenue.
This aspect might not be the most intriguing part, but what makes McDonald’s a lucrative income investment is its business model, which revolves heavily around real estate. The company rents out around 80% of its restaurants to franchisees, who manage about 95% of all locations.
Now, that may seem a bit simplistic. Yet, it somewhat minimizes the intricate relationship between the franchisees and the parent organization. After all, McDonald’s benefits by receiving a share of the revenue from each region. Franchisees are also required to buy supplies from McDonald’s, which provides them at competitive rates. On top of that, both parties typically collaborate on restaurant renovations and sometimes on marketing expenses.
However, it’s worth noting that the biggest ongoing expense for franchisees is rent for the real estate owned by the parent company.
And this is where things can quiet, um, get a bit tense between the franchisor and its franchisees. Rent is set based on market rates, meaning it tends to rise over time, irrespective of how each outlet performs.
Is it fair? Well, that depends on your perspective. Still, McDonald’s is widely regarded as a premier brand name in the fast food arena. While their franchising model might be a little out of the ordinary (most franchisees in this sector own their premises), being associated with the Golden Arches does offer a significant edge.
For those interested in income-focused investments, this real estate-centric business strategy lies at the heart of McDonald’s exceptional dividend growth. In fact, the company has raised its dividend per share every quarter for an impressive 49 years straight, just one year away from the coveted Dividend King status.
This growth hasn’t been trivial; a last quarter boost of 5% reflects almost a 100% increase over the past decade, translating to an annualized growth around 7%. That’s robustly outpacing inflation during this time.
Now, it’s important to manage expectations: you’re unlikely to see significant capital appreciation as a McDonald’s shareholder. The market for fast food is, let’s face it, pretty saturated.
That said, opportunities for above-average dividend growth certainly exist if you purchase shares in this chain, starting at a solid forward yield of about 2.3%. Not too shabby for a quality investment.
Before you decide to invest in McDonald’s stock, here’s something to ponder:
The Motley Fool Stock Advisor team has identified what they describe as the 10 best stocks to consider now, and interestingly, McDonald’s didn’t make the cut. It’s wise to explore these options that may bring impressive returns in the coming years.
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*Stock Advisor returns are noted as of March 22, 2026.
James Brumley holds no positions in any stocks discussed, and The Motley Fool has similar stances on the mentioned stocks. For complete transparency, review their disclosure policy.
The Ultimate High Dividend Growth Stock You Can Buy Now for $1,000 – originally published by The Motley Fool
