McDonald’s Corporation (MCD) is one of the world’s largest fast food restaurant chains. Based in the United States, McDonald’s has over 39,000 locations in over 100 countries. With decades of steady growth and profits, McDonald’s stock has long been considered a stable investment.
One key feature that makes McDonald’s stock attractive to income investors is its consistent dividend payout. But does McDonald’s actually pay a dividend, and if so, what are the details of its dividend policy?
Does McDonald’s Pay Dividends?
Yes, McDonald’s does currently pay dividends to its shareholders. McDonald’s has paid a quarterly dividend every year since its first payout in 1976.
McDonald’s Dividend History
Here is a quick overview of McDonald’s dividend history:
- First dividend paid: 1976
- Current annual dividend rate: $5.52 per share
- Current dividend yield: 2.2%
- 46 years of consecutive dividend growth
McDonald’s has an established history of not only paying dividends, but consistently raising its dividend amounts over time. McDonald’s is considered a Dividend Aristocrat, meaning it has increased its annual dividend for at least 25 consecutive years.
McDonald’s Dividend Details
Now that we’ve established that McDonald’s does in fact pay dividends, let’s take a closer look at the key details:
Dividend Frequency and Dates
McDonald’s pays a quarterly dividend, with dividend payments made on the following approximate dates:
- Early March (Q1 dividend payment)
- Early June (Q2 dividend payment)
- Early September (Q3 dividend payment)
- Early December (Q4 dividend payment)
Shareholders must own McDonald’s stock prior to the ex-dividend date in order to receive the next scheduled dividend payment. The ex-dividend date is usually a few days prior to the dividend record date.
Dividend Rate and Yield
As of November 2023, McDonald’s quarterly dividend rate is $1.38 per share. This equates to an annual dividend rate of $5.52 per share. Based on McDonald’s current share price of around $250, this represents a forward dividend yield of approximately 2.2%.
The current annual dividend of $5.52 was raised from $5.06 in September 2022, representing a 9% increase. McDonald’s has increased its dividend for 46 consecutive years.
Is McDonald’s Dividend Safe?
McDonald’s dividend is considered very safe and extremely reliable. Its payout ratios are low, meaning it pays out a small fraction of its profits. The company generates consistent profits and has easily covered its dividend with free cash flow even during recessions and downturns.
Here are some key metrics that support the safety of McDonald’s dividend:
- Payout Ratio: 50% of earnings paid as dividends
- Cash Dividend Payout Ratio: 65% of free cash flow paid as dividends
- 46 years of uninterrupted dividends
- Recession-resistant business model
Barring an extremely unlikely dividend cut, investors can count on McDonald’s to not only maintain, but continue growing, its dividend in the years ahead.
How Much Are McDonald’s Dividends?
So exactly how much cash income do McDonald’s dividends generate for its shareholders? Let’s take a look at some examples:
Quarterly Dividends
With a quarterly dividend rate of $1.38 per share, here is how much dividend income is generated per quarter based on the number of shares owned:
| Shares Owned | Quarterly Dividend |
|---|---|
| 100 | $138 |
| 250 | $345 |
| 500 | $690 |
| 1,000 | $1,380 |
Annual Dividend Income
And here is how much dividend income is generated on an annual basis based on McDonald’s current $5.52 per share annual dividend rate:
| Shares Owned | Annual Dividend |
|---|---|
| 100 | $552 |
| 250 | $1,380 |
| 500 | $2,760 |
| 1,000 | $5,520 |
So for example, an investor who owns 250 shares would earn $1,380 in McDonald’s dividend income per year at the current dividend rate.
Key Benefits of McDonald’s Dividends
Owning shares of a dividend-paying stock like McDonald’s can provide valuable benefits to investors beyond just the dividend income itself. Here are some of the key advantages McDonald’s dividends can offer:
Reliable Income Stream
The reliable quarterly dividends provide a consistent, passive income stream that shareholders can count on, regardless of market volatility or McDonald’s share price fluctuations.
Inflation Hedge
McDonald’s has consistently increased its dividend over time. These dividend raises help protect investors’ income streams against inflation.
Long-Term Growth
McDonald’s dividends have grown at an average annual rate exceeding 5% over the last 5+ decades. This steady growth results in substantially higher income over long periods.
Reinvestment
Reinvesting McDonald’s dividends through a Dividend Reinvestment Plan (DRIP) allows for share accumulation and compounding over time.
Shareholder Perks
Owning McDonald’s stock allows investors to qualify for shareholder discounts, special offers, and other owner benefits.
Should You Buy McDonald’s Stock for the Dividend?
McDonald’s can be an excellent stock pick for dividend investors looking for reliable, growing income. Here are some key factors to consider:
- Consistent profitability and recession resistance
- 46 years of uninterrupted dividends
- Modest payout ratios with room for future increases
- Wide moat business model and strong brand
- Global diversification and scale
On the other hand, McDonald’s modest 2.2% dividend yield is lower than many other dividend stocks. Income investors aiming strictly for higher yields may want to supplement McDonald’s with some higher yielding names as well.
But overall, buying McDonald’s stock specifically for its stable and growing dividend can make sense for many long-term investors. Just don’t expect McDonald’s alone to generate high levels of current income. Focus instead on the reliability and dividend growth prospects.
McDonald’s Dividend Policy
McDonald’s maintains a shareholder-friendly dividend policy aimed at returning significant cash to shareholders each year through a combination of dividends and stock buybacks.
Here are some key aspects of McDonald’s dividend policy:
- Annual dividend increases to sustain its Dividend Aristocrat status
- Target payout ratio of 60% that balances dividends with reinvestment
- Focus on maintaining investment grade credit rating to support dividends
- Quarterly dividends determined by the company’s Board of Directors
McDonald’s states that its dividend is a top priority in its capital allocation strategy. While McDonald’s dividends aren’t guaranteed, the company’s consistent history points to continued adherence to this shareholder-friendly policy moving forward.
McDonald’s Stock: A Reliable Dividend Growth Investment
McDonald’s offers investors an exceptionally stable business model alongside a proven commitment to returning cash to shareholders. While its dividends may not generate high yields, they provide reliable and steadily growing income.
For dividend investors looking to build a low-risk portfolio—especially those investing for the long-term—McDonald’s checks all the right boxes. Its global brand dominance combined with recession resistance helps make it a core long-term holding for income.
Going forward, income investors can likely expect many more years of dividend increases from this venerable Dividend Aristocrat. McDonald’s stock remains a foundational investment for income portfolios oriented towards quality, consistency, and steady growth over time.