McDonald’s (NYSE:MCD) is among the top dividend stocks in President Trump’s portfolio, according to his disclosures earlier this year. MCD has about 50 years of consecutive dividend increases under its belt. The company is scheduled to announce earnings on August 4. The stock is down about 10% so far this year. Is this an opportunity to buy?
Why McDonald’s Prints Money Without Flipping Burgers
McDonald’s real business isn’t food. About 95% of its restaurants are run by franchisees, not the company. McDonald’s keeps the land and the buildings, and it collects rent and royalties on top of the franchise fee. Franchised locations run at roughly an 83% operating margin. Company-run restaurants sit closer to 12%, before corporate costs even get factored in. Franchisees eat the labor bills, the food cost swings, the day-to-day headaches. McDonald’s just cashes the check.
What Actually Happened in Q1
Revenue was up 9.4% year over year. Comparable sales grew 3.8% globally and 3.9% in the US, and a chunk of that came from the McValue menu plus a Netflix crossover with K-Pop Demon Hunters that apparently got younger customers walking in.
Systemwide sales (this counts every franchised store, not just company-owned ones) were up 11% on a reported basis.
The Dividend Case, In Plain Numbers
MCD payout ratio sits in the mid-to-high 50s as a percentage of adjusted earnings and around two-thirds of free cash flow, so there’s still room to keep raising it without straining the balance sheet.
Valuation
Shares are off almost 11% over the past twelve months while the broader market climbed roughly 18%. This is happening while the company keeps beating earnings estimates, which tells you the selling isn’t really about the numbers.
Part of it is just valuation reverting. MCD trades around 20 to 21 times forward earnings right now, well under its own 8-to-10 year average in the mid-20s.
What Could Actually Go Wrong
Beef prices are up 15.9% year over year through May, and they’re expected to climb another 9.4% before 2026 ends. That’s hitting company-operated restaurants in the US hard enough that management has admitted profitability there isn’t where it needs to be, and they’re now rethinking how many locations the company should own outright versus hand off to franchisees. Add in energy costs squeezing lower-income households and the value-menu strategy starts looking less like growth and more like triage.
Then there’s the GLP-1 question everyone keeps bringing up. Roughly 15% of Americans are expected to be on these drugs by 2035, and most estimates put the restaurant spending hit at under 10% industry-wide. McDonald’s is already leaning into higher-protein, lower-carb items, so it’s not caught flat-footed here, but it’s still a real variable.
The Kiosk Thing Nobody Talks About
Self-serve kiosks are just normal at McDonald’s locations in Thailand and Malaysia. Fewer cashiers needed, and there’s research suggesting people spend more when they order themselves instead of talking to a person. North America barely has any of these compared to Asia. If MCD rolls kiosks out here the way it has overseas, that’s margin upside nobody’s really pricing in yet.
Earnings Land August 4
Q1 and Q4 are historically MCD’s weaker quarters, while Q2 and Q3 tend to run stronger, so a beat wouldn’t shock anyone. One flag worth knowing: at least one Wall Street analyst has pointed out that last year’s Minecraft promotion set a tough comp, and early signals on the FIFA World Cup tie-in are mixed. Revenue could come in soft even if EPS still beats.
So, buy before earnings or wait? Depends which valuation model you believe. The dividend case is about as solid as it gets — five decades of raises, a franchise model that barely needs capital, a payout ratio with room to grow. The stock’s rough year comes down to real stuff: beef costs, a stretched consumer, franchisee margins under pressure. None of that says the business is broken. It just means the market’s arguing with itself over whether MCD deserves 20x earnings or 23x, and that argument is basically the whole trade right now.
While we acknowledge the risk and potential of MCD as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MCD and that has 10,000% upside potential, check out our report about the cheapest AI stock.
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