1 Reason to Buy and Hold This Dividend Stock for the Next 10 Years
Key Points
McDonald's has increased its dividend for 50 years in a row.
The company is trading at near a 52-week low.
It introduced a long-term plan last month to turn things around.
McDonald's (NYSE: MCD) just hit a major milestone this year -- and no, it's not 1 zillion hamburgers sold, as it used to track on the sign beneath the Golden Arches. The company joined an exclusive club and became a Dividend King, raising its dividend for 50 straight years in 2026.
If you are looking for a sustainable dividend stock to buy and hold for the next 10 years, consistency is one major reason to invest in McDonald's.
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50 years of dividend increases
In September, McDonald's raised its quarterly dividend to $1.93 per share, a 4% increase over the previous quarter. It marked the 50th consecutive year of dividend raises. McDonald's officials said the milestone reflects the durability of its brand and business model, the resiliency of its cash flow, and its commitment to growing the dividend, which remains a priority.
"This milestone is the result of decades-long commitment to maintaining our financial discipline and rewarding our shareholders," Ian Borden, global chief financial officer at McDonald's, said.
It comes at an inflection point for McDonald's. The stock has struggled over the past year, hurt by inflation and higher costs. It lost many of its lower-income customers due to higher menu prices, among other factors. The stock price is down 23% year to date, trading near a 52-week low at $235 per share.
But the company put together a solid second quarter, with revenue up 4%, systemwide sales up 5%, comp sales up 1.3%, and earnings up 6%. However, comp sales growth in the U.S. was weaker at 0.8%, and that's an area that will need to improve.
That task will fall on the newly named president of McDonald's USA, Skye Anderson.
NEXT Up
On Sept. 23, McDonald's rolled out a new long-term strategic plan, called NEXT. The four pillars of the strategy are to elevate the menu; capitalize on brand strength and personalize customer relationships; improve operational efficiency and execution through AI, new restaurant designs, and other tools; and invest in people to create a better customer experience.
McDonald's is investing $8.5 billion between now and 2036 to modernize its restaurants, upgrade technology, and improve operations.
The financial goals are to hit a 50% operating margin by 2030 and have a free cash flow conversion rate in the mid-to-high 80% range by then. It also projects a 250-basis-point increase in gross restaurant-level efficiency gains. Further, it is targeting 1.5 percentage-point gains in market share in both the chicken and beverage categories by 2030, while maintaining its leadership position in beef.
This comes, as mentioned, with McDonald's stock at a 52-week low and a forward P/E ratio of 17, which is the lowest it's been since the COVID pandemic crash in 2020.
If McDonald's can execute on its NEXT strategy, it should have ample capital to support its dividend for years to come. There will be short-term challenges with inflation still high and costs rising, but McDonald's brass is taking a longer-term view with this strategy.
I would not be surprised to see McDonald's hit the milestone of 60 straight years of dividend raises 10 years from now.
Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool recommends the following options: long January 2028 $320 calls on McDonald's and short January 2028 $340 calls on McDonald's. The Motley Fool has a disclosure policy.