In 2008, as Lehman Brothers collapsed, the S&P 500 shed 38.49% of its value for the year. Almost all stocks fell by a third or more, and investors cashed out of the sturdiest of companies as confidence in the economy started dwindling. However, a single dividend payer actually gained 8.59% in 2008.
That dividend stock is McDonald’s (NYSE:MCD | MCD Price Prediction). Forbes ran a piece in February 2009 titled “McDonald’s Loves Your Recession”. In that article, they wrote “McDonald’s has mostly thrived not only against pricier fair [sic], but also versus its peers,” and this was not a one-off.
In 2020, restaurant businesses were being pummeled. Very few people were eating out, and entire industries froze. Even then, McDonald’s kept drive-thru lanes humming and dividend streaks intact. This led to MCD stock rising 11.3% in 2020 and then 27.79% in 2021. It has not had a red year since.
Why McDonald’s is so hard to knock down
The company’s balance sheet is built less on food and more on real estate. Its franchise model shifts day-to-day volatility to thousands of owner-operators, and its menu ends up thriving when consumers trade down from pricier options.
These traits have allowed the company to post positive free cash flow in every quarter of both crises, funding dividends that have now grown for 49 consecutive years. In one more year, MCD will become a Dividend King stock. There are only 55 such stocks.
MCD gets you a modest 2.25% dividend yield.
The drive-thru that outperforms
McDonald’s is not only stable and consistent, but its performance is also great. It is a “boring” business, but it is exactly what you need if you want a buy-and-forget pick. Over the past 10 years, MCD stock has returned 225.26% for those who have held on to the stock and kept reinvesting. In comparison, the S&P 500 has returned 201.17%.
The business is still growing fairly fast. Revenue grew 5% year-over-year to $6.84 billion in Q2 2025. This was better than analyst expectations of $6.7 billion. EPS also beat estimates of $3.15 and came in at $3.19, up 7% year-over-year. Net income increased 11% year-over-year.
Analysts expect full-year 2025 EPS growth to be at 5.24% and 8.52% next year. Further acceleration is expected in the early 2030s. Revenue is expected to grow 3.11% in 2025 and 5.61% in 2026.
MCD stock can beat the next recession
McDonald’s is a winner during recessions as it benefits from consumers trading down. In recessions, consumers reduce dining frequency at expensive sit-down restaurants and shift to cheaper alternatives when they eat out. McDonald’s becomes a viable substitute for casual dining and home cooking due to its convenience and low prices.
This dynamic played out well in 2008 as investors and diners were drawn to McDonald’s. Plus, McDonald’s owns most of its locations and leases them to franchisees at above-market rates. In turn, it generates significant revenue from rents and food sales. This is a hidden income stream that provides stability during economic downturns.
All of those strengths are intact, and if a recession were to hit tomorrow, McDonald’s is more likely than not to be a big beneficiary of it. In the longer term, AI should also benefit McDonald’s significantly and increase margins, which is likely why analysts see margins increasing significantly in the early 2030s. Drive-thrus are aggressively automating their operations using voice assistants and even robot chefs. McDonald’s has been testing its first fully-automated restaurant in Fort Worth, Texas, since late 2022.
More upside ahead
MCD stock should keep performing well due to the tailwinds mentioned above. No near-term headwinds are in sight, and interest rate cuts will boost its growth by reducing debt servicing costs. Net interest losses were $1.4 billion in 2024, so these cuts will significantly boost margins.
Analysts have a consensus price target of $326.4 over the next 12 months, or 4% upside. I’d skew more towards the higher end of analyst price targets at $365, as McDonald’s tends to outperform analyst estimates consistently.
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