McDonald's Is Crowned a Dividend King. Is Owning 65 Shares Worth It for $500 in Yearly Dividend Income?

It's official. With last month's announcement, fast-food giant McDonald's (NYSE: MCD) has now raised its dividend payouts for 50 consecutive years, qualifying it as a Dividend King -- one of just one of 59 companies to have an active streak that long.

Labels alone don't make a stock worth adding to your portfolio, however. Is spending nearly $16,000 on 65 shares of McDonald's just to collect $500 worth of annual dividends worth it?

If an additional $500 per year does you any good, then yes, and no, but mostly yes.

The company's recent challenges aren't permanent conditions

With a forward dividend yield of nearly 3.2%, this ticker offers more immediate income than most -- although not all -- stocks of a similar ilk.

That said, it's necessary to acknowledge the reason its yield has grown so much of late. McDonald's shares are down nearly 30% since February's record peak, mostly due to a combination of food price inflation and a K-shaped economy that's forcing the chain's core customers to tighten their purse strings. Same-store sales were up just 0.8% year over year in the United States during Q2, for perspective, and while revenue improved 4% to $7.1 billion, that figure still fell short of analysts' estimates.

The company has responded pretty aggressively, underscoring the depth of management's concern. That's also why income-minded investors may be thinking twice about plugging into its above-average yield now -- it's still a stock of a company that's feeling some pressure on its profits, after all. That's the chief reason shares have continued falling since August, reaching a multiyear low earlier this month.

Just don't read too much into this restaurant chain's current challenges. They're nothing McDonald's hasn't been through -- and survived -- before.

The analyst community believes in the turnaround plan, anyway. Although this crowd anticipates 2026's likely revenue growth of 4.7% will slow to a pace of 2.9% next year, McDonald's is still expected to turn in a profit of $12.88 per share this year, and grow that by nearly 6.7% to $13.78 per share in 2027 en route to $14.47 per share in 2028 (tacking on another 5%). That's not much, but it's something, and it would certainly be more than enough to cover a quarterly dividend that was recently raised to $1.93 per share.

A good option for most income investors

So between a bottom from the stock that likely corresponds (more or less) with the cyclical low of its business and a dividend pedigree that just earned royalty status, why might an income-seeking investor not want to take a swing on McDonald's stock?

Two potential reasons. One of them is the possibility that McDonald's still needs a couple more quarters to truly recognize and then fix any company-specific problems that are causing U.S. consumers to visit its restaurants less often. That's simply a risk every shareholder will have to take.

The other reason that income investors might not want to buy this stock right now is the fact that there are some arguably more attractive alternatives out there, including longer-term Treasuries now yielding in excess of 5%. Government-issued bonds don't offer any potential for price appreciation, but if you're not looking for a "forever" income holding, collecting 5% per year on an instrument with reliable price stability isn't a bad bet.

Otherwise, Dividend King McDonald's looks like it would make a solid addition to most income-growth portfolios.

James Brumley has no position in any of the stocks mentioned. The Motley Fool recommends the following options: long January 2028 $320 calls on McDonald's and short January 2028 $340 calls on McDonald's. The Motley Fool has a disclosure policy.