Investing in restaurant stocks can be risky because there is so much competition in the industry. Companies also have to always evolve and keep up with the latest trends to stay relevant. But there's one restaurant stock that stands apart from the rest, not only in terms of its brand, its financials, but also its dividend, and that's McDonald's (MCD +2.61%).
The company behind the iconic golden arches is arguably the best restaurant stock you can own. Here's why it's the only one that I wouldn't think twice about relying on for its dividend, and why it can be a no-brainer buy for the long haul.
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The company's super-sized margins put it in an excellent position
McDonald's has an incredibly strong position in the fast food industry, as evidenced by its impressive margins. Last year, it generated $8.6 billion in profit on revenue totaling $26.9 billion, for a net margin of 32%. By comparison, Restaurant Brands International, which owns Burger King and other chains, reported a profit margin of only 8% over its past four quarters.
What's also great about McDonald's is that the business doesn't get involved with acquiring other brands, even though, with its financial might, it easily could. By investing in McDonald's, you don't have to worry about how other business units or brands are doing. Instead, you're investing in a high-quality brand that is a leader in the industry and that has demonstrated a strong ability to adapt to changing consumer tastes over the years.
NYSE: MCD
Key Data Points
Its rock-solid dividend makes it a slam-dunk buy for long-term investors
Not only is McDonald's an excellent restaurant stock to own due to its financial strength, but it's also been a top dividend growth stock. Last year, it announced a 5% dividend increase, marking the 49th consecutive year it had boosted its payout. When the company inevitably raises its payout again this year, it'll hit the illustrious 50-year mark, and put it in the category of a Dividend King.
The company has generously been raising its payout for years, making it a top option for income investors to buy and hold. It currently yields 2.5%, which is more than double the S&P 500 average of 1.1%. With a stable business, excellent margins, and a terrific brand, this is one of the few stocks I'd be comfortable hanging on to for not only years but even decades, as not only can you benefit from the company's continued growth, but your dividend income is also to rise significantly over the long term.
