Hungry for Yield? How You Should Play This Famous Dividend Aristocrat Stock Now.

Yahoo

3 days ago

World-leading fast-food chain McDonald's (MCD) reported a second-quarter earnings victory that helped alleviate investor concerns about the strength of the brand in a tough environment for consumers. With the help of promotional crossovers, new menu items, and worldwide demand, the Golden Arches notched its biggest same-store sales increase in close to two years. Its shares climbed over 2% in early trading on the back of the Street's positive response to the figures.
Nevertheless, executives took a cautious line on U.S. low-income consumer trends, where traffic continues under pressure. With inflation-fatigued consumers cutting back on expenditure, McDonald's is relying on value-driven promotions and global expansion to keep the pedal to the floor. The figures come as the overall quick-service restaurant segment fights for share of the market with slowing traffic and changing expenditure trends.
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About McDonald's Stock
McDonald's has a market cap of $218 billion and has over 40,000 restaurants and franchise locations globally, with about 69 million daily customers. Based in Chicago, Illinois, the $219 billion company dominates the world's quick service restaurant sector with a combination of company-owned restaurants and a massive franchise network in over 100 countries worldwide.
Over the past 52 weeks, MCD shares have traded between $271.85 and $326.32, recently changing hands at $304.89, modestly above their yearly lows and trailing the S&P 500's ($SPX) roughly 25% gain over the same period.
Its stock has a forward price-earnings (P/E) ratio of 24.72, slightly higher than the restaurant chain average, in line with investor optimism about the pricing power and brand sustainability of the company. The price-sales (P/S) ratio of 8.40 and the price-cash flow ratio (P/CF) of 20.71 indicate a premium multiple, but steady free cash flow (FCF) and resilient margins support the multiple.
With over four decades of annual dividend increases, McDonald's is a Dividend Aristocrat, and the stock provides a payout of to 2.29%, with quarterly payments underpinned by a 31.73% profit margin and healthy cash generation. The next dividend payout will come in September.
McDonald's Beats on Earnings
In Q2 2025, McDonald's reported adjusted EPS of $3.19, beating the $3.15 consensus estimate, and revenue of $6.84 billion, topping the $6.7 billion forecast. Net income rose 11% year-over-year to $2.25 billion, driven by a 3.8% global same-store sales increase, the largest in nearly two years. U.S. comparable sales rose 2.5%, reversing two straight quarters of declines, supported by promotions like the $5 meal deal, the Minecraft movie tie-in, and the launch of McCrispy Chicken Strips.
Management expects stronger results in the second half of 2025, citing easier year-over-year comparisons and continued international momentum. International Operated Markets posted 4% same-store sales growth, while International Developmental Licensed Markets surged 5.6%, led by Japan, China, and the UK.
Soon after the quarter closed, the comeback of Snack Wraps to a $2.99 promotional pricing level met with 'encouraging' initial response, with franchisees opting for the year-end continuation of the offer. Company executives also highlighted the company's loyalty program, which generated $9 billion in quarterly system-wide sales by members.
What Do Analysts Expect for McDonald's Stock?
Barchart data shows that MCD stock has a 'Moderate Buy' rating consensus based on the strength of the brand, scale benefits, and pricing opportunities as the primary long-term strengths. Though some analysts have reduced near-term expectations in response to U.S. traffic headwinds, the overall sentiment remains positive.
Its average target of $337.43 offers about 10.7% potential upside from the recent close. The top target of $373 offers upside potential of approximately 22%, and the bottom target of $260 indicates possible downside risk of roughly 14.7%. Analysts' primary catalysts for ongoing earnings growth and shareholder returns include international expansion, menu innovation, and digital engagement.
On the date of publication, Yiannis Zourmpanos did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com