How to Buy McDonald’s Shares and Benefit from Dividends
Want to learn how to purchase McDonald’s stock? This article will show you how.
McDonald’s is not only a blue-chip quality stock but the leader in its field and a reliable dividend payer as well. The company has been increasing its dividend payments for over four decades and can maintain this trend for many more decades.
The takeaway is that buy-and-hold investors, income investors and retirement savers may want to take a serious look at McDonald’s stock for many reasons.
McDonald’s was founded in 1940 by Richard and Maurice McDonald. They quickly grew their business into a chain that used the speedee system to revolutionize fast-food operations.
Ray Kroc joined the group in 1955 as a franchise agent and proceeded to buy the company from the brothers. Under his leadership, the company expanded and franchised new territories. The focus was on owning the underlying assets each restaurant was built upon.
Today, McDonald’s is the world’s largest restaurant chain by revenue and volume. The company serves more than 69 million individuals daily and has operations in more than 100 countries, including more than 46,000 stores. Annual revenue topped $23 billion in 2022.
Dividend Statistics and Outlook
McDonald’s is not a Dividend King but it is a Dividend Aristocrat with more than 40 years of consecutive annual increases in its history.
What to know about Dividend King stocks? They have raised their dividends for at least 50 years and MCD is on track for that distinction as well. McDonald’s dividend per share runs with a payout ratio in the mid-50% range, which is very manageable, as is its 8% compound annual growth rate (CAGR).
The CAGR is important to how dividend stocks work and a metric that can change over time. Although the company has a lot of debt, it is mostly used to repurchase shares. However, it is well managed and does not affect the company’s ability pay dividends.
McDonald’s Stock Split
A stock split refers to an issue of new shares in a company to existing shareholders, proportional to their current holdings.
McDonald’s stock split nine times since the early 1970s. The splits break down into two categories, 3-for-2 splits and 2-for-2 splits, of which there were five of the former and four of the latter. Despite the fact that share prices are at their highest levels, there are no other splits expected.
McDonald’s Analyst Ratings
McDonald’s has a solid analyst following and usually comes with at least 20 or so current ratings. At the end of 2022, the stock was pegged at a “moderate buy.” The stock’s price target tends toward rising over time, leading to a higher price target.
McDonald’s Institutional Ownership
McDonald’s, despite its low 0.2% inside ownership, is one tightly held stock. The institutions hold about 70% and are, in general, net buyers of the stock although there are times when the balance shifts.
The other 30% is held by the public in the form of shares, ETFs and other funds, of which there are many. Not only is the stock a member of the S&P 500, the world’s most closely watched and mimicked index, but the company is also a Dividend Aristocrat. It is included in the Dividend Aristocrat Index, and also in a few hundred index-tracking funds that broaden ownership and support share prices.
McDonald’s has competition but don’t spend time worrying about it. There are many fast food restaurants and hamburger joints near McDonald’s, but none that have the reach, recognition, or brand loyalty as McDonald’s.
Wendy’s, its closest competitor, edged out former No. 2 Burger King during the pandemic through international expansion but it is a mere 25% the size of McDonald’s. The No. Sonic, the No. 4 player, is half the size as Wendy’s so you can easily see the difference.
It is possible that one of the smaller chains will come up with some winning combination, tactic or product but you can rest assured McDonald’s will follow suit to maintain its No. 1 position and stay in the rankings as a top dividend choice.
Steps to Buy McDonald’s Shares for Dividends
You can easily buy McDonald’s stock for its dividends in a few simple steps. The stock is listed on NYSE and can be purchased in most (if any) brokerage accounts. However, the decision to purchase McDonald’s stock is not an easy one. It all depends on your portfolio objectives. McDonald’s stock might be a good choice if you are looking to invest in blue chip stocks and grow, dividends, or dividend growth.
Step 1: Open a trading account.
When you want to own McDonald’s stock, you need to open a brokerage account. There are many online brokerage accounts that allow you to buy the stock, and most banks will also allow you to purchase it.
Step 2: Set your portfolio objective.
Next, set the portfolio objectives and determine your risk tolerance. Investors who are looking for blue-chip safety, dividends, and growth might want to include McDonald’s in their portfolios. MCD belongs on any list of dividend stocks and examples of dividend growth stocks.
Step 3: Choose your entry targets.
The simplest way to buy McDonald’s is at the “market price,” regardless of your fundamental or technical outlook. This may be a good option for long-term investors who are looking to buy and hold. Dollar-cost averaging and regular investments can also work.
Others may require a more pinpointed approach that blends the fundamental and technical outlook. Investors should recognize and use well-recognized technical signals like support, resistance, MACD, volume, and the outlook for revenue margin and earnings.
Step 4: Set the order.
Once you choose entry targets, it’s time to enter the order. You can either place a limit order on your stock, or wait for the market’s opportunity to buy.
Step 5: Hold the stock.
The final step, other than selling, involves holding the stock. Investors who want to be part of McDonald’s success must hold the stock once they have purchased it.
Investors of record (those who have registered their ownership with the company’s agent) are entitled to voting privileges as well as the dividend payment and any capital gains the company may experience. Investors who are able to endure the stock’s volatility and can keep up with it will see their investments grow at a low single- to low double-digit CAGR.
Fees for Investing in McDonald’s Stocks
Generally speaking, there are no fees to buy McDonald’s stock because most brokers have no-commission trading in most accounts. However, this may not always be true. Be cautious when making investment decisions. Any fees should be considered in profit and loss calculations.
McDonald’s Dividend Growth CAGR
McDonald’s dividend growth CAGR is the compound annual growth of the distribution over time. This is typically expressed as a three- to five-year average, but it could be any length. It is an indicator of dividend health and attractiveness, and can sometimes be a red flag.
For example, the McDonald’s CAGR was 8% in 2022, which is not an outrageously high number on its own. The payout ratio, on the other hand, was a bit high at 57% and suggests an upcoming slowdown in the pace of dividend increases.
Dividend Capture Strategy for McDonald’s
To capture the dividend, you must buy the stock before the ex-dividend date to earn the next dividend payment. The ex-dividend day is the first day of the quarterly cycle when you can receive the next quarterly payment. But there is a catch. You must hold the stock for at least one year before you can earn the dividend.
This is how an MCD stock buy works:
- Buy the stock as close to the ex-dividend date as possible, which could be as close as one day.
- Hold the stock until the ex-dividend date and then sell it.
- If you sell the stock at break-even or at a loss that is less than the dividend distribution, you earn a profit.
McDonald’s: One Tasty Dividend Stock
McDonalds stock offers a dividend for income investors. It is the No. 1 hamburger chain in the world. It is not only the world’s No. 1 hamburger chain, but it is also the largest fast-food operator by quite a large margin. Its business is almost certain to continue for the next few decades, while the competition catch up. It pays a healthy dividend.
The yield tends to be market-beating in the range of 2% but more importantly, its history of growth puts it on track for Dividend Aristocrat status.
The bottom line: Invest in stocks like McDonald’s to easily build a large dividend stock portfolio.