How McDonald’s (MCD) Maintains its Status as a Leading Income Stock

McDonald’s Corporation (NYSE:MCD) is included among the 11 Best Income Stocks to Buy According to Hedge Funds.

A cook in a busy kitchen assembling cheeseburgers for orders.

McDonald’s Corporation is easily recognized by its golden arches, but most of its locations— around 95 percent— are run by franchisees rather than the company itself. These franchised restaurants generate roughly 60% of the company’s yearly revenue.

Through its franchise model, McDonald’s Corporation earns income by collecting a percentage of sales as royalties and charging rent. Since franchisees handle much of the capital spending, this setup reduces costs for the company. However, in the recent quarter, McDonald’s reported a 1% decline in same-store sales. In the US, where around 40% of its sales come from, comparable sales dropped by 3.6% due to lower customer traffic. As a result, adjusted operating income also declined by 1%.

McDonald’s Corporation is just two years away from becoming a Dividend King. It has been raising its payouts for 48 consecutive years, which makes it one of the best dividend stocks for income investors. The company currently offers a quarterly dividend of $1.77 per share and has a dividend yield of 2.36%, as of July 31.

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