The Best Restaurant Stock to Hold in Uncertain Times
Key Points
In the world of restaurants, one brand's global reach and proven track record set it above the rest.
Its products target budget-conscious consumers, which helps it manage well when times get tough.
- 10 stocks we like better than McDonald's ›
Whether you're concerned about the economy, the job market, the trajectory of the stock market, or something entirely different, there's really only one restaurant stock to consider if you're looking to it to help your investments weather the storm: McDonald's (NYSE: MCD).
First off, there's size. McDonald's $217 billion market cap is not only the fourth largest in the consumer discretionary sector (behind Amazon, Tesla, and Home Depot), but its famed "Golden Arches" and global brand recognition are among the most valuable trademarks in the world.
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There's also the fact that about 95% of the company's 44,000 worldwide locations are locally owned and operated, meaning they pay rent and royalties to McDonald's based on sales, not profits. This is an important distinction, as it protects the parent company from many of the cost pressures restaurants face, including labor and food, as referenced in the company's Q3 earnings results on Nov 5.
"We increased global Systemwide sales by 6% and grew comp sales across all segments, a testament to our ability to deliver sustainable growth even in a challenging environment," McDonald's CEO Chris Kempczinski said, before highlighting the brand's efforts to drive momentum through "everyday value and affordability."
As it stands, McDonald's now serves 68 million people a day, and generates over $26 billion in annual sales.
Image source: Getty Images.
A growth and income play
Finally, there's McDonald's 2.4% dividend yield, which was just raised for the 49th consecutive year in October and is among the top 10 dividend stocks in the consumer discretionary sector. One more year of dividend raises, and it will qualify for inclusion in the very select Dividend Kings, stocks that have increased their payouts to shareholders annually for 50 years or more.
Taken together, this iconic restaurant chain has the pedigree of a business that has navigated economic ups and downs for 85 years and is well-positioned to continue to do so, even in uncertain times.
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Matthew Nesto has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Home Depot, ProShares S&P 500 Dividend Aristocrats ETF, and Tesla. The Motley Fool has a disclosure policy.
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