Buying McDonald’s (NYSE: MCD) stock for a dividend portfolio appears like a good idea. This is because of its sustainable growth potential and hefty cash flows. The company has been enhancing investor’s returns through share price appreciation and cash dividends.
Its dividend yield stands around 2.5%. MCD is considered a dividend king due to its extensive dividend growth history.
It has raised dividends in the past 43 consecutive years. Moreover, MCD has been increasing dividends at an attractive pace. The company recently increased the quarterly dividend by 8% to $1.25 per share. McDonald’s returned close to $21 billion to investors in the past three years through dividends and share buybacks.
Financial Numbers Supports Cash Returns
The company appears in a financial position to sustain its cash returns for investors. For instance, its global comparable sales grew in the 17 successive quarters. The global comparable sales rose 5.9% in the latest quarter from the year-ago period. The company’s consolidated revenue came in at $5.4 billion, up 3% in constant currency.
Steve Easterbrook said, “As we work to build an even better McDonald’s experience for customers by providing convenience on their terms, we continue to embrace the culture of innovation that helped launch our company over 60 years ago.”
Its cash flows are offering a complete cover to dividends. The company had generated an operating cash flow of $7.74 billion in the trailing twelve months compared to dividend payments of $3.54 billion. Indeed, the huge gap in cash flows and dividend payments offer a room for dividend increase along with share buybacks.
Fundamentals are Strong for McDonald’s Stock Price
MCD shares grew 14% in fiscal 2019, down from the broader market rally of 29%. Fortunately, the underperformance in the past twelve months offers an attractive buying opportunity for new investors. The company’s strategy of returning cash to investors along with robust comparable sales growth is likely to support the share price. Overall, McDonald’s appears like a safe play for the dividend portfolio.