$MCD · Ale's World of Stocks · 2026-11-05

we will talk about one of the most well-known leading companies in the market, which is characterized by flexible dividend payouts during recessions: McDonald's, and its trading symbol is MCD.

On the surface, McDonald's faced an extremely tough year, with its stock falling by about 30% from its highs , as inflation continued to be a major obstacle for them.

This puts pressure on customers with middle to low incomes, and budget-conscious consumers are somewhat resistant to rising fast food prices. However, while Wall Street was busy selling the stock, new financial disclosures revealed that Donald Trump had bought millions of dollars' worth of shares during this particular downturn.

In our latest analysis of the most important stocks Trump has bought according to his most recent disclosures, McDonald's was undoubtedly one of the most interesting moves on the entire list.

So today we will conduct an in-depth investigation to see exactly why Trump is betting on them, and we will analyze their massive $8.5 billion modernization plan. We will see if their recently acquired "dividend king" status is secure, and we will also assess whether buying at this low point was a smart move or if McDonald's is stuck in a dividend trap.

Trump bought shares in the company worth up to $5 million in his latest deal. Of all the stocks he bought, this one might be the least surprising of all.

Because, as almost everyone knows at this point, Trump had a long and public, decades-long love affair with McDonald's food, so to speak.

Well , it seems he is no longer just interested in eating burgers , but wants to become a partner in ownership through investment. Looking at the stock chart, the timing of this latest purchase seems fairly logical.

McDonald's is having a very difficult time this year, with its stock down about 30% from its peak, which is worrying for a stock that has always performed strongly over the past decade.

So why is Wall Street getting rid of it instead? In reality, it all comes down to the pressures that the average consumer is under.

With persistent inflation and rising interest rates putting pressure on household budgets, low-income earners have begun to reduce eating out, with strong resistance to fast food prices, especially those that are rising.

In fact, we can see this slowdown manifested even in their latest earnings results, where global similar-store sales rose by only 1.3% , while domestic-store sales in the United States also increased by less than 1%.

Moreover, input costs have been severe, with CEO Chris Kempczinski noting that wholesale beef prices have literally doubled in their main markets over the past five years, which is truly insane.

So, when you combine rising food costs and low- income consumers in a very tough macroeconomy, Wall Street became concerned that McDonald's might get caught in a "margin trap," where they are effectively forced to choose between two equally unpalatable options.

They can either raise their prices and risk losing customers, or offer huge discounts to attract them, but at the cost of eating up a large part of their profits.

To me , it looks like a lose-lose scenario , which is one of the reasons why I have n't bought the stock during this downturn, at least not yet. However, I would say that if there is one company we should not rule out because of a cyclical downturn in the macroeconomy, it is certainly likely to be McDonald's.

Historically, I recall two times when the stock fell by more than 30% from its peak, the first during the 2003 recession and the second in 2015. On both occasions, critics claimed that the fast-food industry was finished.

However, both times McDonald's completely reinvented its operations , more than doubling its stock price over the next two years.

And now, they are implementing the exact same plan through an $8.5 billion modernization plan they call "Next".

First, they are working to change the customer experience using new technology. They are introducing an AI-based operating platform called "Arch IQ" to improve the efficiency of the kitchen staff.

They are also testing an automated drive-through service request tool called " Archie". They are even adding pickup lockers inside stores to actually help make delivery drivers faster and more efficient.

Secondly, they are testing entirely new, high-margin advertising on digital car order boards that are already experiencing massive traffic . I mean, they actually boast about having over 29,000 takeaway outlets around the world.

And there are more than 70 million customers who enter through their doors as well, every day.

So, as you know, management estimates that this new out-of-the-box advertising network alone could generate up to $1 billion in high-margin sales for them. Third, they strongly defend their core menu with the "Best Burger" initiative.

That's what they call it. They aim to improve their bread and burger cooking processes. They are also introducing the new "Big Arch" burger for larger appetites. They manually expand the breaded chicken range for those who prefer it.

They even offer protein-rich options to meet the needs of consumers taking GLP-1 medications, which is somewhat surprising.

And of course, as you know, McDonald's is no exception. In addition, you really can't forget the sheer scale of McDonald's core real estate business, a business model where nearly 95% of their 45,000 global restaurants are actually franchises.

This means that McDonald's owns or leases prime land under the restaurants, then collects fixed rent checks with a high profit margin and royalties directly tied to total sales.

This is a much more profitable structure that allows them to achieve high operating margins exceeding 45%, while generating approximately $7 to $8 billion in annual free cash flow.

This strong cash generation is precisely what enabled them to achieve a legendary feat last month, when they announced an increase in their annual dividend for the 50th consecutive time, officially crowning McDonald's as the dividend king now as well.

In addition, due to the significant price decrease, those dividends now generate a return of more than 3%, which is very attractive for a dividend king like this. The only reason I have n't touched the stock myself yet is simply because of the low growth and the valuation, which is still fairly high even after the decline.

Now, this price-to-earnings (PE) ratio is at least 23% lower than its 5-year average. So, once again, I can understand why investors might look at this pullback and think, you know, it might be worth buying shares to secure dividends as well at these levels .

However, this price-to-earnings ratio is still more than 20% higher than the sector as well.

And what was, in my opinion, always a rather distinctive stock, I don't see as much future upside potential in it as I do in other names out there that are actually much less and have bigger discounts, in my opinion.

But, yes, these are my thoughts on McDonald's and their place during this whole transformation. I think that between the real estate rent collection model, the incredible 50-year streak as the king of dividends, and a new digital advertising network for drive-thru orders that could unlock huge amounts of new high-margin sales, you certainly can't rule out this business in the long run, even if near-term growth remains very slow .

But for me personally, it's probably not a stock I would buy at the moment. Remember, however, that McDonald's was just one of the five major stocks we covered that Trump was buying.

So, if you want to see the other four bets, including two profitable AI companies and even a battered media giant with a dividend yield above 6%, all of which we ranked higher on our board, be sure to watch the full episode video linked here somewhere on the screen, and in the description below, I'll put it there for you too.

But, hey, while you're at the bottom, feel free to leave your thoughts on McDonald's stock in the comments, because I'd love to hear from you and get your views on all of this too.