When done properly, dividend growth investing is an all-weather strategy. What I mean by this is that an investor's portfolio should produce steadily growing passive income, regardless of what may be going on in the world. A dividend growth stock portfolio should also fare better than the broader market in market downturns.

One stock that fits this description is the Dividend Aristocrat McDonald's (MCD 0.37%), which has raised its dividend for 46 years straight. And while the S&P 500 index has fallen 14% year to date, McDonald's stock has only dropped 7% during that time.

But should investors buy the stock now? Let's go over McDonald's fundamentals and valuation to answer that question.

Another strong quarter for the golden arches

McDonald's reported $5.7 billion in revenue in the first quarter, which works out to a 10.6% growth rate over the year-ago period. What was behind the large-cap stock's robust revenue growth? 

The restaurant franchise's global comparable sales increased 11.8% year over year in the first quarter. Comparable sales growth in each of McDonald's three segments led the company's overall results higher in the quarter.

Strategic menu price increases and growth in digital channels led to 3.5% comparable sales growth in the U.S. segment (which includes both company-operated and franchised restaurants). Digital channels growth was largely driven by the 26 million active MyMcDonald's rewards members in the first quarter. For context, this program has been built from the ground up since its launch last July. 

The continued rolling back of COVID-19 restrictions led comparable sales 20.6% higher in international, company-operated markets. And exceptional comparable sales growth in Japan and Brazil made up for the uptick in COVID-19 cases and restrictions in China within the international developmental licensed markets. This led to 14.7% comparable sales growth in the segment. 

The closing of McDonald's locations in Russia in mid-March and Ukraine at the end of February explain why revenue growth lagged comparable sales growth. 

At the bottom line, McDonald's recorded $2.28 in non-GAAP (adjusted) diluted earnings per share (EPS) in the first quarter. This is equivalent to an 18.8% growth rate over the year-ago period. 

Besides the company's higher revenue base, this impressive earnings growth was the result of two factors. McDonald's non-GAAP net margin expanded 210 basis points year over year to 30.1% in the first quarter. And thanks to its share repurchase program, the company's weighted average diluted share count fell 0.5% to 747.6 million in the first quarter.

Thanks to McDonald's burgeoning rewards program, analysts anticipate that the company will deliver 7.7% annual earnings growth through the next five years. 

A person makes a contactless payment at a drive-thru.

Image source: Getty Images.

On its way to becoming a Dividend King

McDonald's growth outlook isn't the only thing to like about the stock. The restaurant franchise is just four years away from 50 consecutive years of dividend increases, which would make it a Dividend King.

With a dividend payout ratio set to be around 57% in 2022, McDonald's is retaining plenty of cash for business expansion, share repurchases, and debt repayment. Thus, it's simply a matter of time before the stock rises to royalty status. This is also why I believe the dividend will grow in line with earnings.

The stock's market-beating 2.2% dividend yield and high-single-digit annual dividend growth potential makes it an undisputed dividend growth titan

The valuation is bearable

McDonald's is clearly a fundamentally healthy business.

At the current $250 share price, the stock is trading at a forward price-to-earnings (P/E) ratio of 25.3. This isn't cheap compared to the 20 forward P/E ratio of the consumer staples sector. But McDonald's is the cream of the crop, so it would be unrealistic to expect it to trade at any less than a well-deserved premium to its peers.