In the past, a good portion of equity investing was about dividends — that nice chunk of cash public companies return to investors every quarter. A focus on tangible income helped keep stock valuations grounded and gave investors an enhanced sense of ownership in a business. You essentially got a cut of profits, which is incredible when you think about it.

According to The Wall Street Journal, dividends started losing their popularity in the 1980s and 1990s. Investors started prioritizing growth, and companies began retaining more earnings to generate capital appreciation. That said, large blue chip stocks like McDonald’s (MCD -1.93%) have maintained the dividend-paying tradition. Let’s dig deeper into how many shares you need to receive $5,000 each year.

McDonald’s is more than just a dividend stock

Dividend-paying stocks are not all alike. McDonald’s stands out because of its incredible track record. Since starting its annual distribution in 1976, the company has increased its payment annually for 49 years in a row, which makes the stock a member of the Dividend Aristocrats® family.

While investors tend to pay closer attention to yield, over the long term, dividend growth can be even more important. According to calculations from business media company Kiplinger, McDonald’s dividend has grown at a compound annual growth rate (CAGR) of 7% over the last 10 years and 14% in the previous 20 years.

At that rate of growth, the payout would double every five years. This represents serious wealth creation potential, especially in a tax-advantaged account such as a Roth IRA.

Despite consistently increasing its dividend, McDonald’s maintains ample coverage with a payout ratio of 61%. This metric measures the amount of earnings paid out as dividends, and it indicates that McDonald’s has plenty of room for continued dividend growth for years into the future.

A stable and resilient business

While long-term investing is the key to sustainable stock market returns, it also introduces its fair share of risk. The vast majority of public companies that existed when McDonald’s went public are no longer around. According to a study by McKinsey, the average S&P 500 company exists for just 18 years, due to changing consumer tastes, technological disruption, or simple mismanagement. When building a dividend portfolio, it’s essential to bet on businesses that can stand the test of time.

Image source: Getty Images.

On the surface, McDonald’s may seem particularly vulnerable. Consumer food preferences tend to evolve over time as people become more health-conscious or simply move on to newer options. That said, McDonald’s has historically managed to overcome these challenges.

Unlike a pure-play restaurant stock, the company’s franchise model shifts significant operational risk and costs to the franchise owners while ensuring high-margin recurring revenue from royalty fees. It also benefits from a vast and expanding real estate portfolio, often in prime locations around the world. This helps shield the company from macroeconomic challenges like inflation, which can hurt individual franchise locations.

Investors shouldn’t expect McDonald’s earnings to grow every year. Still, over the long term, the company looks positioned to maintain relatively slow but steady growth, which will help fund its dividend.

So, how many shares do you need for $5,000 in dividends?

McDonald’s stock currently offers a forward dividend of $7.08 per share, which comes out to a dividend yield of 2.46%. You would need 706 shares to get $5,000 per year, which would cost just over $203,000.

To be fair, that’s a lot of money, and you probably shouldn’t put it all in one place. However, McDonald’s stock would make a great addition to a diversified income-focused portfolio because of its track record of dividend sustainability and its resilient business model.

After a period of heavy inflation left quick-service restaurant prices elevated, McDonald’s (MCD -0.47%) has decided to lean into value meals. In fact, on its recent fourth-quarter earnings call, the company used the word “value” or a variation of the word “affordable” more than 50 times.

When quick-service restaurant pricing competition heats up, McDonald’s has a tendency to come out on top due to its large scale and franchise model. Let’s dive into the company’s most recent results to see if this is a good time to buy the stock.

Leaning into value meals

McDonald’s overall Q4 results were largely lackluster. The company saw an E.coli scare early in the quarter that caused it to pull its popular Quarter Pounder hamburgers from its menu at some locations. It also led to some large traffic declines, particularly in the U.S. states that were affected. However, the company did a good job of finding the source, its sliced onions, and the Centers for Disease Control and Prevention (CDC) declared the outbreak over by early December.

U.S. sales hit their trough in early November after the outbreak and then began to pick up thereafter. Overall, the company’s U.S. same-store sales dropped by 1.4% in the quarter, which isn’t all that bad considering the foodborne illness outbreak. It noted that it saw a decline in check size, but that there was a slightly positive guest count.

International licensed markets, meanwhile, were much stronger, with comparable-store sales climbing by 4.1%. The company credited sales in Japan and the Middle East for the strong results. International company-operated stores saw comparable store sales edge up 0.1%, hurt by some weakness in the U.K.

Overall global same-store sales, meanwhile, rose 0.4% compared to a 3.4% increase last year. That was ahead of analyst expectations for a 1% decline in same-store sales, according to StreetAccounts. Overall revenue was flattish on the quarter at $6.39 billion. That fell just shy of the $6.44 billion analyst consensus, as compiled by LSEG. Adjusted earnings per share (EPS) declined by 4% to $2.83, but met analyst expectations.

Looking ahead, the company said it plans to spend between $3 billion and $3.2 billion this year in new unit development. It plans to open approximately 2,200 restaurants in 2025, with a quarter of them in the U.S. and international operated segments. Meanwhile, it’s looking to add 1,000 new restaurants in China. Overall, it’s looking for its unit count to grow by slightly more than 4%, with 1,800 net unit additions.

It added that it expects its adjusted operating margin to be above the 46.3% level it saw in 2024. However, it expects currency to be around a $0.20 to $0.30 headwind to EPS.

McDonald’s plans to lean heavily into value this year, starting with the launch of its McValue platform in January in the U.S. In addition, it said it is making further enhancements to its value programs in international markets in the first quarter. It noted that it has seen improvements in value perception in parts of Europe with its 4-euro Happy Meal, while its $5 Meal Deal has been resonating with customers.

When asked about the effect on gross margins, it said these deals drive other purchases and that the average check on $5 Meal Deals was above $10. It also said that its Buy 1 Add 1 for $1 promotion has been accretive to overall check transactions.

Overall, the company expects a full sales recovery from the E.coli incidents by the start of the second quarter. Meanwhile, it’s looking for margins to improve compared to 2024 levels. It also said it has some new menu innovations in store for this year, and that it will continue rolling out its Best Burger initiative, with it expected to be in all the countries it operates in by the end of 2026. This initiative includes small tweaks to how its burgers are assembled and cooked that have been leading to better customer satisfaction scores.

Image source: Getty Images.

Is McDonald’s stock a buy?

McDonald’s has done a good job navigating through its E.coli scare, keeping the damage to its sales to a minimum. While the effects could continue into Q1, it looks like it should be an overall quick recovery to get back to normal.

Meanwhile, the company is clearly leaning into value at a time when many people have been complaining about quick-service restaurant prices. This is a good move, as the company has historically done well at gaining market share during periods of pricing wars, to the detriment of its fast-food burger competitors. The combination of value meals to drive traffic and new menu items to entice customers into full-price purchases tends to be a good one.

The company is also embracing digital orders to expand the reach of its loyalty program and to help drive more sales through personalized offers. It had 175 million active loyalty members at the end of 2024.

From a valuation perspective, McDonald’s trades at a forward price-to-earnings (P/E) of just under 25 times 2025 analyst estimates. That’s around historical valuations for the company.

MCD PE Ratio (Forward) data by YCharts.

Overall, McDonald’s should be a solid stock to own over the long term. It’s an iconic brand that still has room to continue growing its store base, while also having room to drive growth through digital ordering and its loyalty program, and by embracing its value roots to gain market share.