Prediction: This High-Yield Dow Dividend Stock Will Become a Dividend King Before the End of the Year.

When you see the so-called golden arches of a McDonald's (NYSE: MCD) sign, you know exactly what to expect. Burgers, fries, soda, milkshakes, and an apple pie lie beyond the doors of the restaurant. The reliability of its offerings has helped McDonald's thrive as a business for a very long time. And the company is on the cusp of another impressive achievement, Dividend King status. Here's why I think this is the year it gets there.

What does McDonald's do?

On the surface, McDonald's is a restaurant that sells food to customers. However, there's more to the story. As noted above, every McDonald's sells basically the same thing with the same basic quality and speed. That consistency is a core part of the McDonald's story. It basically helped to create the fast-food segment of the restaurant industry.

Image source: Getty Images.

McDonald's also helped create the franchise industry. The company not only owns and operates its own locations, but it also effectively sells the right to operate McDonald's restaurants to others (its franchisees). The franchised locations pay fees to McDonald's. Often, McDonald's owns the property on which a franchise is located, as well, which adds even more upside to the proposition as property values increase.

Very few people would tell you that McDonald's serves good food, but it is most certainly affordable and reliable. And that has allowed the brand to grow to more than 45,000 locations in more than 100 countries. Roughly 95% of its restaurants are franchised. In the second quarter of 2026, the company's restaurants generated $37 billion in revenues, up 5% year over year, with same-store sales up 1.3%.

Systemwide sales aren't the same as the revenue that McDonald's itself generates. That's because most of its revenues come from franchise fees. McDonald's second-quarter revenues came in at roughly $7.1 billion, up 4% year over year. Earnings per share in the quarter were $3.32, up 6% year-over-year.

McDonald's is well-positioned for the current environment

It was a pretty good quarter, given that inflation has consumers tightening their budgets. But then, affordable, trustworthy food would be a good option for eating out in that situation. While some customers may simply stop going out, others will be trading down to McDonald's. And when economic concerns abate, and customers trade up again, McDonald's will benefit as less wealthy customers start eating out again.

The strength of the business model, coupled with the ubiquity of the brand, is what has enabled McDonald's to achieve 49 consecutive annual dividend increases. It is what I believe will allow the company to increase the dividend again in the fourth quarter, which is when it typically announces an increase. That will be increase number 50, making this Dow component a Dividend King.

Don't underestimate the importance of this achievement. The list of Dividend Kings includes just 58 stocks. While there's a restaurant supplier on the list, Sysco (NYSE: SYY), and a number of consumer staples companies, there are no restaurants. That McDonald's is on the verge of Dividend King status is a testament to the impressive success, and ongoing strength, of its business model.

Is McDonald's worth buying?

With a dividend payout ratio of roughly 60%, there is ample room for another increase. Now add in a 2.9% yield, which is well above the market's 1% yield, and there is a lot for a dividend investor to like here. And a recent 25% stock pullback, as of this writing, has left McDonald's price-to-sales and price-to-earnings ratios below their five-year averages, suggesting it is attractively priced. If you are a conservative dividend investor focused on dividend consistency, McDonald's, a soon-to-be Dividend King, could be a good addition to your portfolio.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Sysco. 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.