Key Takeaways
- McDonald’s and Home Depot both yield 2.8%, so $10,000 in either pays $280 a year today.
- Home Depot’s dividend has the wider cushion: it took 61% of free cash flow over its latest 12 months, against 70% for McDonald’s. Home Depot also carries less debt.
- McDonald’s raised its dividend 4% in September 2026, while Home Depot’s latest yearly raise was 2.2%.
- Over 20 years, which stock pays more depends on whether each dividend grows at its five-year rate or at its latest pace.
McDonald’s (MCD) jumped more than 6% on Nov. 4 after its third-quarter profit beat expectations. The same day, Home Depot (HD) rose 7% after Democrats regained control of the House and Senate, on hopes for housing-affordability policy and lower Treasury yields.
For anyone holding a dividend for 20 years, the check matters more than a day’s jump. And today the checks match: both stocks yield 2.8%, so $10,000 in either pays $280 a year.
The two split on what that check does next. If I could only own one of them for the next two decades, which would it be?
| Metric | McDonald’s (MCD) | Home Depot (HD) |
|---|---|---|
| Dividend yield | 2.8% | 2.8% |
| Annual dividend | $7.72 | $9.32 |
| 5-year dividend growth | 7.3% a year (fiscal 2020-2025) | 8.4% a year (years ended January 2021-2026) |
| Cash dividend payout ratio (TTM) | 70% | 61% |
| Net debt/EBITDA | 3.2x | 2.3x |
| Interest coverage | 7.9x | 8.4x |
| Forward P/E | 21x | 22x |
Source: TIKR, Nov. 9, 2026. TTM is the 12 months to Sept. 30, 2026, for McDonald’s and to Aug. 2, 2026, for Home Depot.
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McDonald’s keeps the raises coming
McDonald’s grew in the third quarter, mostly outside the U.S. Global systemwide sales rose 4% to over $38 billion, and global comparable sales rose 1.5%. U.S. comparable sales slipped 0.2%, but CFO Ian Borden said they returned to growth in September after declines in July and August. And on the August call, Borden said, “We will not get beaten on value.”
Over the 12 months to Sept. 30, 2026, McDonald’s paid $5.28 billion in dividends out of $7.49 billion of free cash flow. That’s a solid but fairly full 70%. Free cash flow has covered the dividend every year for a decade:
In September 2026, McDonald’s raised its quarterly dividend 4% to $1.93 a share, its 50th straight year of increases. The main risk is legal. A proposed federal class action filed on Oct. 2, 2026, alleges that McDonald’s AI pricing tool coordinates menu prices across restaurants. McDonald’s calls the claims meritless.
Home Depot has the bigger cushion
McDonald’s is adding restaurants, while Home Depot is waiting on housing. Sales in the quarter ended Aug. 2, 2026, rose 5.7% to $47.9 billion. But comparable sales rose just 1.7%, and customer transactions fell 1.0%. Bigger discretionary projects remain under pressure, with housing turnover at historical lows. CEO Edward Decker said on the May call, “we’re not looking at a marked improvement in underlying demand.”
Over the 12 months to Aug. 2, 2026, Home Depot paid $9.22 billion in dividends out of $15.10 billion of free cash flow, a well-covered 61%. That figure got a lift from $730 million of tariff refunds in the second quarter. Management expects higher fuel and input costs to offset those refunds over the year. Over a longer stretch, the payout has risen as free cash flow fell from its peak:
Free cash flow fell from $18.0 billion in the year ended January 2024 to $12.7 billion in the year ended January 2026, and the payout reached 72% that year. On Aug. 20, 2026, Home Depot declared its 158th straight quarterly dividend, at $2.33 a share.
So which dividend wins?
I’d hold McDonald’s for the next 20 years.
Over two decades, I care most about growth, and McDonald’s is growing its dividend faster right now. Its dividend rose 5.8% in fiscal 2025. Home Depot’s rose 2% in the year ended January 2026. At those paces, $10,000 in McDonald’s would pay about $10,030 over the 20 years, against about $6,956 from Home Depot. At their five-year rates, Home Depot would come out about $1,510 ahead, but its latest raise is a long way below that rate.
McDonald’s also has earnings growth behind its raises. Home Depot expects adjusted EPS to grow between 0% and 4% this fiscal year, from $14.69. Analysts expect McDonald’s normalized EPS to rise from $12.20 in fiscal 2025 to $14.54 in fiscal 2028:
Home Depot’s dividend is still a very good one. It’s better covered today, it carries less debt, and 158 straight quarterly payments show how seriously management takes the check. But over 20 years, I’d rather own the dividend that’s growing today, with earnings that analysts expect to keep rising behind it.
Of course, a Home Depot raise closer to its five-year pace would put it back ahead.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
