Fast food giant McDonald's (NYSE:MCD) isn't a stock market favorite as we close out 2014. In fact, it's 9th from last among the 30 Dow components when ranked by year-to-date gains.

But its hefty dividend payout helps Micky D's stand out as one of the highest-yielding stocks in the blue chip index right now. Let's take a look at that payout and why McDonald's remains a top dividend stock for more reasons than just its unusually high yield.

Long history
McDonald's has been paying — and boosting — its dividend for 39 straight years stretching back to 1976. That's easily enough of payout history to qualify the stock as a Dividend Aristocrat, which requires 25 consecutive annual hikes. 

A key benefit of a long dividend past is that it provides lots of data for income investors to judge how their dividend is likely to hold up during boom and busts. In the depths of the Great Recession, 2009 for example, Mickey D's raised its annual payout by a hefty 10% to $2.20 per share. The dividend has grown substantially since then, even through the leaner years of 2013 and 2014. Investors' most recent raises were 5% in each of the last two fiscal years. McDonald's dividend now sits at $3.24 per share, equating to an annual yield of 3.5%.

Ample cash flow
Of course, a dividend is only as good as the cash-generating power behind it. McDonald's shines in this department as well. The company consistently earns billions in free cash flow that it can direct toward dividends and share repurchases. Lately, operating cash flow has clocked in at about $7 billion per year.

Metric 2013 2012 2011 2010
Cash from Operations $7.1 $7.0 $7.2 $6.3
Capital Expenditures $2.8 $3.0 $2.7 $2.1
Free Cash Flow $4.3 $4.0 $4.5 $4.2

In billions. Source: McDonald's financial statements.

As you can see in the table above, McDonald's hasn't been forced to skimp on investments in the business in order to keep its dividend marching higher. Spending on capital projects has grown from a $2 billion annual pace in 2010 to $2.8 billion in the last fiscal year.

For all of 2014, the burger chain plans to spend $3 billion in opening 1,500 new locations and remodeling 1,000 existing restaurants. Only a handful of companies could swing an investment like that. But in McDonald's case the spending will still leave plenty of cash for distribution to shareholders in dividends and stock buybacks.

Big commitment to dividends
McDonald's management prioritizes dividend payments over buying back shares, which is rare among large dividend stocks right now. In fact, through the first three quarters of 2014 the company has returned $4.6 billion to shareholders, with more than half of that total directed to dividends.

Yes, the dividend payout has been growing faster than earnings lately, particularly as McDonald's has struggled to book any comparable-store sales growth in the last two years. But the company's payout ratio, or the percentage of earnings that are dedicated to the dividend, is still a comfortable, and substantial, 60% of trailing twelve month earnings.

MCD Payout Ratio (TTM) Chart

MCD Payout Ratio (TTM) data by YCharts

McDonald's financial struggles look set to keep the stock one of the Dogs of the Dow for the third year in a row. That's not an achievement that investors would be happy about. However, the flip side of that under-performance is that the company pays one of the highest yields around. And that should keep the stock a popular choice for income investors looking for substantial and growing dividend payouts.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.