McDonald's Is 29% Below Its 52-Week High and Yields 3.2%. Is This the Best Entry Point in Years?

Investors, even professionals with years of experience, can be seduced by stocks mired in bear markets. Arguably, that temptation is ratcheted up when the stock in question is an older large-cap company. Think of it as the theory of a "strong stock in a weak place."

With the stock trading 29% below its 52-week high of $341.75, it appears many investors aren't yet taking the bait on McDonald's (NYSE: MCD), and it's easy to understand why. Not only is the fast-food stock well into bear-market territory, but its 20.6% decline in 2026 makes it the third-worst performer in the Dow Jones Industrial Average, with only International Business Machines and well-documented offender Nike delivering worse returns.

McDonald's could rebound, but investors will need to be patient. Image source: Getty Images.

Following a Monday, Oct. 19, close at $242.67, shares of McDonald's are probing levels rarer than McRib availability. On the other side of the coin, patient investors who embrace the stock today may be rewarded over the long term.

Royal vibes

Due to the aforementioned declines, McDonald's shares yield 3.2%, nearly triple the S&P 500's dividend yield. Speaking of this dividend, which has long been one of the stock's primary attractions, the burger chain boosted its payout last month, marking the 50th consecutive year it has done so. That makes McDonald's a Dividend King, or one of the rare companies with dividend increase streaks of at least 50 years.

More important is the fact that McDonald's payout increase was nearly 4%, slightly topping the September jump of 3.7% (year over year) by the Consumer Price Index. In other words, the McDonald's dividend has some inflation-fighting chops.

Tapping into the McDonald's dividend as an inflation buffer has merit, as experts have long viewed dividend growth stocks as effective inflation hedges. After all, assuming more tolerable inflationary environments, payout growth helps investors retain more of their purchasing power.

There's no telling when the Federal Reserve will get inflation under control, but if Morningstar is right, the McDonald's payout could average annual growth of 9% over the next decade. Barring a 2022 sequel, 9% growth should be a more-than-adequate inflation hedge.

McDonald's is trying to get it right

Typically, stocks don't fall 29% from their 52-week highs without good reason. For McDonald's, higher costs and cost-conscious, inflation-sensitive consumers have been headwinds. And CEO Chris Kempczinski owns up to execution woes creating dissatisfaction among customers.

The company isn't sitting idly by, hoping for customers to return simply because they like McDonald's. At its recent investor day, the fast-food king unveiled its NEXT plan, which includes a broader embrace of artificial intelligence (AI), store revamps, streamlined operations, and a simplified menu. Don't underestimate the potential benefits of menu simplification, because many customers value simplicity and value, not complexity. NEXT aims to boost cash flow by $100,000 per year at an average McDonald's location.

As the stock's price action confirms, investors are in "show me" mode about the NEXT gambit. Still, if the execution is there, McDonald's could shake out of its current rut, and that's more important to investors than the possibility that McRib could make another appearance over the near term.

Todd Shriber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends International Business Machines and Nike. The Motley Fool recommends the following options: long January 2028 $320 calls on McDonald's and short January 2028 $340 calls on McDonald's. The Motley Fool has a disclosure policy.