McDonald's Dividend Streak Lives On: Is Cash Flow Still Rock-Solid?

McDonald's Corporation’s MCD third-quarter 2025 earnings call reinforces why the company remains one of the most reliable dividend payers in the market. In October, McDonald’s announced a 5% dividend hike, marking its 49th consecutive year of dividend increases, a powerful sign of confidence in its cash-generation ability even in a pressured consumer environment.

The foundation of this streak is McDonald’s resilient cash flow model. Management highlighted that total restaurant margin dollars surpassed $4 billion for the first time, supported by steady global comparable sales growth and disciplined cost control. Despite inflationary pressures on wages and food, particularly beef, the company continues to generate strong operating margins, with the year-to-date adjusted operating margin improving to 47.2%. This margin strength provides ample room to fund dividends while still investing in growth.

Crucially, McDonald’s capital allocation priorities remain unchanged. The company is balancing reinvestment in new restaurants, digital initiatives and menu innovation with consistent shareholder returns. Management emphasized that free cash flow is first deployed toward high-return growth opportunities, with remaining cash returned through dividends and share repurchases. This disciplined approach has allowed McDonald’s to keep rewarding shareholders without compromising long-term competitiveness.

That said, the outlook is not without challenges. Management remains cautious about consumer health heading into 2026, noting persistent pressure on lower-income traffic and elevated inflation. Still, leadership expressed confidence that systemwide cash flows, particularly at the franchise level, remain solid enough to support ongoing capital returns.

McDonald’s dividend streak appears well-supported by durable cash flows, strong margins and a proven capital allocation framework. While near-term macro risks persist, the company’s ability to consistently convert sales into cash suggests its dividend remains on firm ground.

How McDonald’s Stacks Up Against Key Dividend Rivals

When it comes to dividend reliability and cash flow durability, McDonald’s continues to outshine its closest peers. Yum! Brands YUM, the owner of KFC, Pizza Hut and Taco Bell, runs an asset-light, franchise-driven model that supports steady free cash flow and regular dividends. However, YUM’s higher leverage and heavier exposure to international markets make its cash flows more sensitive to currency moves and regional slowdowns, adding a layer of risk to dividend sustainability during volatile periods.

Restaurant Brands International QSR, which owns Burger King, Tim Hortons and Popeyes, offers an attractive yield but faces more uneven cash flow generation. Ongoing reinvestment needs at Burger King and mixed brand-level performance have limited dividend growth flexibility, even as cash flows stabilize.

Against this backdrop, McDonald’s superior scale, margin resilience and predictable free cash flow profile give MCD a clear edge in maintaining and growing dividends through economic cycles.

MCD’s Price Performance, Valuation and Estimates

McDonald’s shares have gained 4% in the past six months against the industry’s 2.1% decline.

Price Performance

In terms of its forward 12-month price-to-earnings ratio, MCD is trading at 23.02, down from the industry’s 24.64.

P/E (F12M)

Over the past 30 days, the Zacks Consensus Estimate for MCD’s 2026 earnings per share has increased, as shown in the chart.

MCD currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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