The Best Dividend Stocks screen is designed to avoid the trap of chasing the highest yield at any cost. It requires a ChartMill Dividend Rating of at least 7, while also demanding minimum scores of 5 for both profitability and health. MCDONALD'S CORP (NYSE:MCD) McDonald's Corp. (NYSE:MCD) is a good example of a company that satisfies this balance: it carries a dividend rating of 8, a profitability rating of 8, and a health rating of 6, putting it comfortably through the screen's default filters.
Why MCD passes the dividend screen
The screen starts from the idea that dividend investing should focus on sustainability, not just yield. McDonald's, with a 2.69% dividend yield, does not offer the highest income in the market, but the fundamental report points to a track record that income investors often value:
- Dividend track record: the company has paid a dividend for at least 10 years and has not cut it over that period.
- Dividend growth: the dividend has grown by an average of 7.35% per year, which is a steady rate of increase.
- Dividend sustainability: the payout ratio stands at 59.6% of net income. That is on the higher side but still leaves room for reinvestment and is generally considered manageable.
- Industry context: the yield is well above the industry average of 1.30% and also above the S&P 500 average of 1.72%.
For investors who want to inspect the underlying data, the fundamental analysis report provides the full breakdown behind these scores.
Profitability and health provide the foundation
The Best Dividend screen intentionally keeps profitability and health thresholds modest, but McDonald's clears them with room to spare. This matters because dividend payments ultimately come from cash generated by the underlying business. The fundamental report shows:
- Profitability: return on assets of 14.45% and return on invested capital of 17.85%, both better than a large majority of industry peers.
- Margins: operating margin of 46.00% and profit margin of 31.62%, both strong for the Hotels, Restaurants & Leisure group.
- Health: Altman-Z score of 4.72, which indicates low bankruptcy risk, though the debt to free cash flow ratio of 5.70 is a point to monitor.
The company also has less shares outstanding than it did one and five years ago, which is a mild positive for per-share dividend growth over time.
What dividend investors should keep in mind
Even though McDonald's looks suitable for a dividend screen, it is not without risks. The payout ratio is not ultra conservative, and the growth report shows that EPS growth is expected to slow from 15.06% per year historically to 8.57% going forward. Valuation also appears full with a price/earnings ratio of 22.01. For a dividend strategy, those factors reinforce the importance of looking beyond the yield and considering the quality of the underlying cash flow.
More stocks that fit this methodology can be found with the Best Dividend Stocks screen, where the same combination of dividend, profitability, and health filters can be adjusted to suit individual preferences.
Disclaimer: This article is for informational and educational purposes only and does not constitute financial advice or a recommendation to buy or sell any security. Always conduct your own research and consider your risk tolerance before making investment decisions.
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McDonald's (NYSE:MCD) Delivers Dividend Quality With Balanced Fundamentals
The Best Dividend Stocks screen is designed to avoid the trap of chasing the highest yield at any cost. It requires a ChartMill Dividend Rating of at least 7, while also demanding minimum scores of 5 for both profitability and health. MCDONALD'S CORP (NYSE:MCD) McDonald's Corp. (NYSE:MCD) is a good example of a company that satisfies this balance: it carries a dividend rating of 8, a profitability rating of 8, and a health rating of 6, putting it comfortably through the screen's default filters.
Why MCD passes the dividend screen
The screen starts from the idea that dividend investing should focus on sustainability, not just yield. McDonald's, with a 2.69% dividend yield, does not offer the highest income in the market, but the fundamental report points to a track record that income investors often value:
For investors who want to inspect the underlying data, the fundamental analysis report provides the full breakdown behind these scores.
Profitability and health provide the foundation
The Best Dividend screen intentionally keeps profitability and health thresholds modest, but McDonald's clears them with room to spare. This matters because dividend payments ultimately come from cash generated by the underlying business. The fundamental report shows:
The company also has less shares outstanding than it did one and five years ago, which is a mild positive for per-share dividend growth over time.
What dividend investors should keep in mind
Even though McDonald's looks suitable for a dividend screen, it is not without risks. The payout ratio is not ultra conservative, and the growth report shows that EPS growth is expected to slow from 15.06% per year historically to 8.57% going forward. Valuation also appears full with a price/earnings ratio of 22.01. For a dividend strategy, those factors reinforce the importance of looking beyond the yield and considering the quality of the underlying cash flow.
More stocks that fit this methodology can be found with the Best Dividend Stocks screen, where the same combination of dividend, profitability, and health filters can be adjusted to suit individual preferences.
Disclaimer: This article is for informational and educational purposes only and does not constitute financial advice or a recommendation to buy or sell any security. Always conduct your own research and consider your risk tolerance before making investment decisions.
Read full article here »