The Motley Fool Take Profitable Arches

If you’re looking for growth and income in your next investment, consider McDonald’s (NYSE: MCD). It’s a fast-food giant, yes, with a market value recently near $155 billion. But it’s also very much a real estate company that happens to rent exclusively to fast-food franchisees. Of the 39,096 McDonald’s outlets in the world as of the end of September, only 2,658 were actually owned by the company. The other 36,438 were owned by franchisees.

That’s a profitable business model: Franchise fees, rent payments on restaurant buildings and the sale of supplies required to operate a McDonald’s restaurant generate fatter profit margins than actually owning and operating a franchise. Still, McDonald’s isn’t immune to the impact of coronavirus-related shutdowns; its top line tumbled 30% year over year for the quarter ending in June.

The picture has brightened over the past quarter, though, as consumers flocked back when the pandemic looked like it was starting to ease. By that time, McDonald’s had had enough time to adapt, focusing on a “3 D’s” strategy: digital orders, deliveries and drive-thrus.

With vaccines around the corner, the company is even better positioned to return to its pre-pandemic growth pace, and recent marketing efforts such as celebrity “famous orders” are generating more sales. The clincher: McDonald’s dividend recently yielded almost 2.5%, and it has increased that payout annually for 44 straight years.