MCD Deep Dive: The Cash Flow Story Disguised as Hamburgers

This morning, a small kitchen-and-bath supplier nobody's ever heard of went up 200% before lunch. By the afternoon, it was already sliding back down. Meanwhile, one of the most boring yet beloved businesses in America just got cheaper than it's been in five years. In today’s market, it's easy to miss which one is the actual opportunity. 

This month, Greg starts with FGI Industries ($FGI), a $9 million company that briefly saw a day's worth of trading change hands worth $1.5 billion. He walks through how a thin float and a wave of momentum trading turned an unremarkable quarter into a day trader's dream. He also gets into why chasing the inevitable crash back down, especially by shorting it, can be far riskier than it looks. It's a story with zero connection to cash flow. 

From there, he makes the case that all assets and investments are built on cash flow, which sets the stage for a deep dive on the McDonald’s ($MCD) story. It's not a hamburger story. It's a royalty and rent story, with 95% of restaurants franchised, over 60% of revenue recurring, and returns on invested capital that have sat in the high teens since 2009. Greg breaks down the 10-year dividend model, why the stock is about as cheap as it's been in half a decade, and what would actually have to go wrong for the thesis to break. 

Two companies, two completely different definitions of opportunity. One's a lottery ticket. The other's a cash flow machine that's been quietly compounding for decades. 

TOPICS COVERED

[00:41] Introduction: flash money vs. slow and steady

[03:31] FGI Industries ($FGI): how a small-cap stock spiked 200% in a morning

[09:36] The hidden danger of shorting a low-float speculative stock

[13:03] Dividend yields are falling — is the strategy still viable?

[17:16] Why every asset ultimately depends on cash flow

[20:32] Introducing McDonald's ($MCD): not the story you think it is

[21:53] Franchise economics: royalties, rent, and McDonald's scale advantage

[30:39] Return on invested capital and 20 years of consistent dividend growth

[32:21] The 10-year dividend model: mapping out a potential double

[34:45] What could go wrong: GLP-1 drugs, shifting habits, rising input costs

[41:04] Valuation today and where we would start buying

[43:20] Final takeaway: discipline beats the illusion of easy money

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Transcript

[00:00:11] Greg Denewiler:

This is Greg Denewiler, and you are listening to another episode of The Dividend Mailbox, a monthly podcast about dividend growth. Our goal is to stuff your mailbox full of dividend checks. When they grow over time, a funny thing happens: you create wealth.

Welcome to episode 62 of The Dividend Mailbox. And today, we're gonna go from something that's flashy and has all the glitz of what everybody dreams about finding for themselves, being in it, and watching it go up by two, 300% in one day. And then we're gonna go, and we're gonna end up at the very other end of the scale, and that's where it's just slow and steady.

We have another idea that we are looking at for dividend growth, and this is the true definition of investing for cash flow. Hopefully, you get the point of why we probably put the two together. The problem with slow and steady is sometimes it takes a year, sometimes it takes two years, and sometimes it takes 20 years.

But in the end, that number at the end of 20 years goes to the tune of earning 13 times your money over a 20-year period. And these one-day 200% flash-in-the-pans have absolutely nothing to do with cash flow, but everything about what's exciting and the allure of easy money. So I hope that by the end of this episode, you will figure out that there really is a choice.

You can go after luck and excitement, hope for the best at the end of the day, or you can go after discipline and long-term creation of wealth.

Just as a quick note before we get into this, dividend growth investing sounds simple, but doing it well over long periods of time takes discipline and patience. These episodes give you pieces of how we think about it, but if you're trying to build wealth, it helps to have a clear framework you can come back to when things get uncomfortable, which is why we wrote Dividend Growth: The Quiet Engine of Wealth.

And ultimately, the real goal of it is to help you tune out the noise and make better long-term investment decisions. So if that interests you and you'd like a free copy, you can find it in the show notes or at growmydollar.com/dividend-growth-book. With that, let's get into the episode.

We're gonna start with how insane has the market become. Just this morning, you know, I was looking at the quotes, just glancing at what the market was doing, and in a little corner on the screen, they showed the current day's trends. One of the stocks that was on there was up about 200% at the time, after the market had only been open probably, I don't know, an hour or so, give or take.

So usually I don't pay any attention to those, but for some reason, this one kind of intrigued me. Lo and behold, it was a company who had just announced earnings. It was FGI Industries. We're not talking AI here. We're not talking data center. We're not talking technology, software, or some drug company that has a drug in a pipeline.

We're talking about a company that sells kitchen and bathroom supplies. With total sales around 130 million, their global footprint is not very big, and they reported a 2.9% year-over-year revenue increase, and their revenues were $31.9 million. Gross margins improved about five percentage points, and operating income was $1.4 million.

You have to remember, that's with an M, that's million. So this was clearly a very small company. I was just a little curious, okay, well, why is it up 200% when this is nothing out of the ordinary? And I looked at the market cap yesterday. It was $9.1 million. Today, it hit a high of over $35 million.

You might look at that and say, "Okay, well, maybe there's something going on here. They got something they're working on, or big client in the wings," who knows? But just glancing through the report, they have a total net revenue projection of 134 to 140 million. So they're looking for, you know, 10, 15% revenue growth. Company's gonna start making more money.

It's on a positive trend, so, you know, they're willing to pay up a little bit. But here's where the story gets totally absurd. They have total outstanding shares of about 1.5 million shares. They have 500,000 shares that are, that are in float, so this stock has relatively thin trading. It trades on average about 70,000 shares a day.

Not a whole lot goes on. But for some reason today, it has just exploded. Just a month ago, the stock was at $3.90. By the end of the day, stock actually had a high of almost $20 a share. If you just take 15, it had traded 101 million shares. That is a market value of over $1.5 billion. That's with a B. So you got a little company here projecting a loss of between 300,000 and a profit of 1.1 million for the year, but all of a sudden, this became a day trader's dream.

So one would have to ask, what in the world is going on here? Well, I think the story is pretty simple. This is not a cash flow story, and I think this ties into where we're going later. It has nothing to do with reality. It has nothing to do with the company. It made no difference whether they had probably any revenue at all.

You know, they had very little profit, but it was moving, and it was moving fast. So consequently, everybody piled onto the bus. It was off to the races. Over a three-day period, it goes from trading about 70,000 shares to 101 million, and then it goes back. The next day, it only traded about 3 million shares, and it's probably on its way back down to 70,000.

I think what it shows is just the mental attitude that people have with all the social media, with these apps. You can pretty much trade anywhere, anytime. And it is becoming a point where if I can't make 5% in one day, then, you know, why bother? Well, on April 14th, the stock was at $3.90. Just a week later, it hit a high of over 11, and then a month later, not quite a month, three weeks, it was back down to 4.60.

And by July, just a month ago, the stock was back down to $3.90. Apparently, nobody learned their lesson, but again, nobody cares. And I think here's, here's the real danger of these things. Clearly, most people figure they probably won't hold it through the end of the day, and the first thing that would maybe come to mind is, "This is a chance to make a lot of money on the way back down, because surely it's almost a guarantee the stock's gonna go back down."

But there's one problem. If you went in and shorted it, meaning you sold stock you don't have, betting that you're going to buy it back at a cheaper price later, which is virtually guaranteed, you have one big risk. If you even found a firm like Schwab or Fidelity or Merrill Lynch, what happens in a really small float like this if the people that own the stock that were long-term holders decide, "Oh, you know, this is a free lunch. I've just been served Christmas in August, and I'm selling out. I'm gone."

They sell their stock, and then Merrill Lynch or Fidelity or Schwab no longer has any stock on their books, and they give, we'll just say Greg Denewiler a call, who says, "I see free money on the table here, so I've sold it short." And they go, "Greg, we no longer have stock that we can loan, so we have to buy you back in."

And guess what? They don't give you a day. They don't give you a week. You're bought back in immediately. So at that point, if that stock is still on fire, you just lost a lot of money. The second thing is the, the people that are just in there day trading, sometimes these things are halted from trading, and two, they move really fast.

I mean, it's, it's pure gambling, and it's pure people having fun. So that's fine. You realize what it is. I think most people don't realize the risk, but they're totally seduced into, "I can make a quick 10, 20, 50% in a matter of minutes or an hour." But different degrees of investing can totally divorce itself from reality.

And there's nothing wrong with speculation, but you better realize that some of this stuff is you're really playing with, with lit sticks of dynamite, and you're passing them around, and somebody's gonna be stuck holding it. But, you know, it is what it is.

I bring it up because we live in an entirely different place. We look for long-term dividend growth. You're not listening to this podcast trying to find the next meme stock or what the latest trading idea is. You know, we're looking to try to compound wealth long term. So I do think that this affects everybody, and it affects the dividend investor.

This is what is becoming more and more in focus, and it just makes the world of dividend investing, at least on the short term, a little more challenging. Now, on a longer-term basis, I think if anything, it just helps us because if you pull capital away from something, it brings the price down. But if there's true earnings growth, there's true dividend growth, and it's consistent over time, you're gonna create wealth.

And it is my opinion that eventually the price will reflect that.

So this kind of leads to another point that has come up here recently. In Monday's Wall Street Journal, which was August 10th, there was an article in there that, that says, "Rally has retirees rethinking yields." And basically, it was an article about dividend investing and how it's becoming more challenging.

And it sort of alluded to the fact that it's making people question whether it's really a viable strategy now because yields have come down so much. The real reference point was the yield of the S&P 500, and it's down to 1.01%. So when you look at that yield just by itself, it's pretty easy to draw the conclusion that why even bother, because it's such a small number. First of all, I'm gonna say the world of dividend investing and dividend growth investing has not changed.

If anything, it just continues to get better because what's behind these numbers is the only thing that really matters. Prices have gone up faster than companies have raised their dividends. So consequently, if you go out and buy something for $10 and it pays a dollar dividend, then it's a 10% yield. If the stock goes up to 20, but the dividend only goes up to a dollar fifty, it doesn't double, your yield's coming down, but you've still got great dividend growth and the total return is great.

That's kind of the environment we're in now. The only problem is we haven't gone from a 10 to a 5% yield. We've gone from a one and a half to one and a quarter. Now we're down to basically 1%. So what that does flow into, and if you've listened to us in the past, especially in the last probably six months to a year, it is getting more challenging at the moment to execute a dividend growth strategy.

You're really tempted to go into some of these higher dividend-yielding stocks because you're, you're looking for a better current yield right now. But what you gotta be extremely careful about, and I've used this example a few times in the past, but one of them is AT&T. You got a dividend yield that's 6%, but total return on that stock is nowhere near what the S&P 500 has done.

These high-yield situations, the value of the stocks actually come down. It's just, it becomes extremely challenging. Well, I would use the example that, um, you know, it's Warren Buffett. If there's not good alternatives, you just wait. You wait for the fat pitch. You don't have to worry about striking out because the only thing you have to worry about is striking out by making an investment that doesn't give you the return you want just because you just felt like you had to be doing something all the time. The good news is money market funds are almost 4%, short-term Treasuries are 4%, so you do get an income while you wait.

But the other side of the picture is when you're in a, a situation where growth is really the focus, which has been, you know, the tech sector, and then you get something like this FGI Industries, there's where all the focus is going, and that's where the attention goes. The gap between, you know, more of the value dividend plays is widening from what the higher-growth tech sector valuations are.

So it does help open up some alternatives. And then you always get something where it's not quite going right and opportunities come up.

Before I go on to an opportunity that we think has come up for a few reasons, which we will get into, you know, one thought that I have had, I used to think there's growth investing, there's dividend investing, there, you know, there's all different sectors. You can buy art, you can buy collector cars, and you can buy gold, you can buy raw land.

I mean, there's all kinds of places where you can put money. Some people invest to try to get an asset that's gonna go up in value to speculate, and some people invest for cash flow. Well, it has kind of dawned on me that in the end, everything, without exception, depends on cash flow. The whole world is basically revolving around cash flow.

And the reason I say that is, to me, an interesting statistic is the most expensive artwork so far was a piece that was supposedly painted by Leonardo da Vinci, and they're not even 100% sure whether he actually did it or not. So how would you like to pay $450 million for something that you're not 100% sure it was even painted by the artist that you think it was?

But in November of 2017, that's what it sold for. The most expensive car has been a 1955 Mercedes-Benz SLR. Can't even say it. It's a German coupe, and it's basically, I believe, like a Gullwing Mercedes, a, a special edition of that. It was purchased in May of 2022 for $143 million. Well, the value of artwork, the value of, of some collector cars has been extremely profitable.

Guess what? How did somebody buy the car? How did somebody buy the artwork? It took cash. You had to have cash. You had to have something that generated cash flow that allowed you to buy that asset. It really comes down to that for everything. So if somebody says, "Well, you know, I don't like the stock market, it's too risky. I wanna, I wanna be in real estate," or, you know, usually the common, the common thing that comes up is real estate. Well, here's the deal. If you're buying apartments and you're renting them out, how the heck does the tenant in your apartment afford the rent? Well, they have a job. Sometimes they work for a major corporation, sometimes they work for a small business.

But in the end, it's the economy, and it's the corporate world that drives the bus. The corporate world pays rents for office buildings, they pay salaries to their workers who buy cars, who rent apartments. They develop projects which, you know, they have to go out and buy land. Anyway, I could go on and on about this, but I think you get the point.

In the end, the stock market, if you look at it as a cash flow mechanism, and that's where you're focusing long term, that's where the wealth is. And in fact, we're gonna go on to the next part of this episode. This is the complete opposite of our FGI example. We're now going to look at McDonald's.

My guess is you're kind of waiting for this name, and you're thinking it's gonna be something that's at least somewhat exciting. You got somebody doing a podcast, they want people to, uh, listen to it, so they gotta come up with intriguing ideas. And your first thought may be McDonald's is not an intriguing idea.

And I have to say, I'm guilty of this for the longest time. I just always kind of associated. Look, it's a hamburger chain. It's been around for a long time. The story is very simple, and it hasn't changed much. Well, the very first thing I'm gonna tell you, McDonald's is not the story you think it is. It is not about selling hamburgers.

Now, of course, hamburgers give the, the franchisees the ability to pay the rent and to pay the royalty fees. But it's a cash flow story that's really the very definition of growing consistent cash flow stream because 95% of the restaurants are franchised. The company owns 5%. There's about 45,000 restaurants out there, and 56% of the underlying land of these restaurants is owned by McDonald's.

A little more than 60% of their revenue is reoccurring. It's very stable. It's royalties and rents. So this would probably be the appropriate time before I start losing people. McDonald's has been a great creator of shareholder wealth. You go back 20 years, and if you would've put $10,000 in the S&P 500, it's currently worth $90,000.

Clearly, it has been a very good two decades. But if you would've invested it in McDonald's over that same period, you now have $137,000, and that is even after this year when the stock has not performed very well. In fact, it's down about 10% year to date, which partly is why we're looking at it, and the S&P is up 13%.

So even after that divergence, over the last 20 years, McDonald's has been a real winner. As I'm going to show you, it's just all about compounding the cash flow, and McDonald's cash flow is very predictable. If you look at their competition, basically it's Chipotle, Domino's, Taco Bell, which is Yum, Shake Shack, Wendy's.

Of course, there's a lot of other specialized hamburger chains out there. It's a very competitive business, but I will tell you that McDonald's is a player that's finely tuned. The average McDonald's does $4 million in sales. If you look at Taco Bell, they're around $2.3 million.

Wendy's, $1.9 million. Burger King comes in at $1.7 million. Subway is all the way down around $500,000 a year. So by and large, McDonald's is the much more profitable one. Chick-fil-A, those are private. They do have sales that run up around $7 million. They are the most successful on a sales basis per store right now, but they're a totally different franchise model.

The franchisees don't own the stores. They basically just work for the company, is probably the short version. Chipotle, they own all their stores, so they're a totally different business model. If you look at McDonald's, the total revenue is almost $27 billion from a standpoint of the corporate revenue.

But if you look at the company-wide franchisees' sales, they're coming in at almost $140 billion, while Taco Bell total revenue is about $68 billion. Burger King, they are coming in a little less than $50 billion. So right away, McDonald's has a real advantage from a standpoint of buying power with suppliers, advertisers.

They get better deals because they're playing with much larger numbers. That right there creates a little bit of a barrier to entry. Really, what the heart of these things are is the royalty fees, and if you look at that, they just changed it a year ago. They're 5% on their royalty fees. And then the overall take usually, when you include rent, it's between 12 and 20%.

Burger King, which right now is the number two hamburger franchise in the country, they just overtook Wendy's. Burger King is 8.5% plus rent. Wendy's, the total franchise take is about 10%. Taco Bell is about 10%. Subway is 12.5%. So what you've got is royalties and rents, and those are extremely stable.

That's really the big story on McDonald's. Because they operate very few restaurants, their profit margins are really through the roof, and it's kind of amazing. Out of almost $27 billion of revenue in 2025, the franchise revenue is $16.5 billion, and of that, it breaks down to $10.5 billion comes from rents and $6 billion comes from royalty.

And the company-owned revenue of just the 5%, because they're all doing about $4 million, give or take, is $9.7 billion, and the sales of the stores can fluctuate, and it's not gonna move those rent payments very much. There is a little bit of a sales kicker in them, but for the most part, they're extremely stable.

I mean, you come up with net income of $8.5 billion, which is 30% of the revenue.

One of the things that at first glance, and I have to say that this did have some impact on me in the past just glancing at it, they have actually a slightly negative shareholder equity. If you just dig very far at all, what you realize is that even though the debt is as high as the assets on the balance sheet, because of the profitability of the company and the consistency of the earnings, the times interest earned ratio, which basically tells you that they have enough earnings to pay their interest costs, it's almost eight times, which means it gives it a triple-B-plus to A rating on the debt.

So the debt is just not an issue. In fact, it—if anything, it probably makes sense on a capital allocation model because they really maximize shareholder return with it. Another great piece of this story is you may be thinking, "Well, okay, they've got 45,000 stores out there. How many more McDonald's franchises can they sell?"

You know, you've got a margin of safety here 'cause even if they don't sell another franchise, number one, you got the rent payments coming in. Those continue whether they sell another franchise or not. There's no change there. In fact, if anything, what they do have is they do have inflation escalation clauses, and they do get a little bit if they actually sell more.

Then you also have the fact that the royalty fees are 4% for the older ones, and for the newer ones, they're now 5%. Well, if the price of a hamburger goes from $1 to $2, as an extreme example, then right there you have a franchise fee that goes from 5% of $1 to 5% of $2. So just that alone, you have some growth.

And then when you look at the fact the shares outstanding 10 years ago were 906 million outstanding, and now they currently have 707 million. That alone creates growth by just spreading the same profit over fewer shares. It really is just the classic conservative capital allocation, you know, dividend growth story.

Now, this is the part that I love to see.

If you look at return on invested capital, going all the way back to 2009, you have return on invested capital that's been running in the high teens, and it's been very consistent. Right now, it's around 17%. It really lives in, in right around in that area. The lowest number since 2009 has been in 2020. It dipped down to 11.9%.

Well, we all know that was a disaster year for people going out to, to eat, and McDonald's still in 2020 still had operating income of $7.1 billion. So that's a testament to a very consistent business. Well, let's go to, let's go to earnings, which is the driver of cash flow and of dividends.

20 years ago, they were $2. 10 years ago, they were a little less than $5. As of June 30th, they're at a run rate right now of $11.95. That has more than doubled.

The dividend has gone from $3.44 to $7.44 on a current run rate. So that has more than doubled. There we have our 7% dividend growth, and the good news is, in order to maintain that into the future, the payout ratio 10 years ago was 72%, right now it's 60%, so it's actually come down a little bit.

You know, they consistently pay out a pretty good attractive amount of their cash in dividends. They can do that with fairly high confidence because they have a very predictable business. So it's, it's everything you want in a good long-term dividend growth story. Now, as we continue to look at this thing, let's look at our classic simple dividend model that we use, our 10-year projections of, okay, if they continue to grow the dividend at 7% like they have historically, then the dividend's gonna go from $7.44 to $13.68 out in 2035.

You will have received $102 of dividends. Currently, the stock at the time of this is around $273. So you've gotten back a little more than a third of your money, and that does not include any compounding. If you just take a simple with the yield right now, 2.75, if in 10 years it's paying a dividend of 3% and they have $13.68 of dividends, you get a stock price that's $455.

Between the capital gain of the stock and the dividends, you've got slightly more than 100% return on your money, which is a double, which is what we shoot for. We hope our dividend grows by 7% a year for 10 years. It's a double, and we want the total return to be a double on the overall investment. The 100% 10-year goal is probably pretty achievable, and what makes it even more achievable from my standpoint, at least the way I look at it, is, okay, to get the dividend to $13.68, currently the earnings estimates for next year are $14, so they already cover it, and the earnings estimates for 2028 are basically $15.

So we check another box with our simple 10-year dividend model.

So now, you know, what can go wrong with this story? Well, one of the challenges right now, and it's no secret, there's the, uh, the weight loss drugs. The whole purpose of them is, is to suppress your appetite and you're not as enticed to eat junk food or really any amounts of food in the same quantities that you did before.

And my comment to that is, one of the great things about McDonald's and their management is they have a very deep bench. They come from some very brand-oriented companies. More than half of them have come up through the system. Their backgrounds are PepsiCo, Procter & Gamble, a lot of the big names. So they're well aware of managing a big brand, but here's where McDonald's, in my mind, is pretty proactive.

The fact that just from the first quarter to the second quarter, revenue actually went from $6.5 billion to $7.1. They had growth. But the U.S. market was barely up. Traffic was down a little bit. They did have higher sales price on the average customer. They still had decent revenue growth.

And what did McDonald's do? They brought in a new president for their U.S. division because they're not gonna wait until they turn into a Wendy's situation where it's in a really distressed point right now, and it's very likely maybe gonna get taken private. It's a management that recognizes they have a strong brand and they do everything they can to protect it.

But, you know, another risk is that people are tending to be a little bit more healthy. My attitude on that is people may be a little bit more healthy, but, you know, unfortunately, and I don't know why the universe works this way, but the stuff that tastes really good tends to be varying degrees of bad for you.

Why that is is beyond me, but grease and salt, you know, those French fries. Are sales gonna go away? No. But here's one thing that probably will happen, and McDonald's has done this in the past. If everybody wants healthy, they can come up with a little healthier way to make what they make or change their product mix a little bit, and that's what everybody else is gonna be doing, too.

Really, what you're betting on there is that management will pivot on some level.

You know, in looking at where some of the challenges may come, when you've had a huge spike in beef prices, whether it's the lettuce, whether it's the vegetables, everybody fights the same battle. But when you're the biggest player out there, it gives you a cost advantage, and it gives you negotiating power that the other guys don't have quite as much of.

You might have some of the lower end of their customer base that just doesn't buy as much, but you also have a little bit of an offset that you may have some of the people that would normally go to a little nicer place trading down. There is a little insulation from the corporate level because the hit really comes on the franchisees, but you have to have a profitable franchisees to continue the model to move forward.

It just means that maybe the growth slows down. Worst case, maybe they have to cut a franchise fee, but I think that's a long—they're a long ways from that.

And I, I will add just a final note. One of the great things about this story is that all the real estate on their balance sheet is all at cost, and a lot of that real estate has been on there for decades. So if they ever decided to spin that real estate off into something like a real estate investment trust, there is probably huge value there.

Now, I will be the first to say that that is probably never gonna happen, but it is a great margin of safety. Can it go down 25% from here? Sure. But it's pretty hard to see where this stock over the next 10 years, the possibility of, of turning into an Eastman Kodak or something like that.

And I'm sure that I would get a lot of pushback on this, but that's okay. If I had to choose between putting all my money in McDonald's or all my money in Nvidia, and I had to wait 10 years before I could sell it, personally, I would take McDonald's all day long. They may not sell as many hamburgers.

There may be some, some issues out there. They've had some E. coli scares. They've had the mad cow disease scares. These things pop up and eventually fade, but it's just a core part of the American economy. And one of the problems with something like an Nvidia, this happens in technology over and over, when things are going great, everybody thinks that it's never gonna stop.

I mean, you know, you, you know how it, how it happens. They, um, the technology shifts, and they may not go bankrupt or disappear, but all of a sudden, the stock that couldn't miss now struggles to do anything for sometimes forever. In our mind, it's all about trying to find the consistent cash flow, and in the end, it's the cash flow from McDonald's franchises that allow you to go out and buy art and allow you to buy expensive cars.

And I will close with just the fact that cash flow is great, but you don't wanna pay too much for it. So one of our challenges is we actually have had a small position in this. It was one of the original stocks in the model portfolio. We bought it in, uh, around 65, and we've held it since 2010.

I never really added any money to it 'cause the stock usually is not that cheap. And lo and behold, you wake up one day and it's at 270, and it's actually been up into the low 300s. But as we really take a look at this story, even though the stock is way up from what we paid for it, on a value basis, it's about as cheap as it's been in more than five years.

The P/E on it is down around, on a projected next year's earnings, it's down to 19. Usually, it trades at a premium to the market. It's, in our mind, started to create an opportunity. We'd like to see it below 270. We will start buying a little bit. But we won't really go into this in a significant way until it gets below 260.

We just, we just wanna get it to where on a yield to cash flow, we would like to see it above 5%. We like to buy things that are like a 6% free cash flow yield, which means if you own the whole company, basically you're gonna earn 6%. And then, of course, that grows over time. In this case, where you've got the predictability that this one has, I think it's okay to lower the hurdle rate a little bit.

Normally, you don't even get a chance to buy it at this, at this point. Even though it's not an exciting business, it's an exciting cash flow story. We're looking to add more to it if we get really much weakness at all from where we currently are. In order to make it a full position, I really would like to probably see it down around 250.

I don't, I don't know if we're gonna get there or not, but we'll just have to wait and be patient.

So as we conclude here, really McDonald's from my mind is the classic dividend growth story, and it's got a lot of consistency to it. It's not the quick-get-rich scheme, but what it is is a way to build value over time. And I'm gonna, I'm gonna step out on a limb here. Personally, I think something that is extremely important is don't lose sight on what your long-term goal is.

Are you just looking for entertainment? There's probably nothing wrong with taking a small part of, of your portfolio and playing around, but the problem is you have to be really careful. One of the biggest challenges to creating wealth is becoming overconfident. And personally, I think all these trading apps, the internet, it really is a version of drinking out of a fire hose.

It really leads to overconfidence, and I think it harms investors. Just the casual retail investor, they seem to be totally losing sight of what investing is really about, and it's all about these quick money schemes. Occasionally you get, you get lucky, 0.1% of the population that happens to be at the right place at the right time, has a bunch of stock options that makes huge money, um, was in SpaceX at the beginning, but those are just far and few.

And the average person really doesn't have a chance to do that. And I always go back to the Ronald Read story. You don't have to have a great job. You don't have to make a lot of money. You just have to have a lot of discipline. I also think that these stories such as, um, FGI, where you had something that had a huge return in one day and you have illusions or fantasies that, "Oh, well, if I just would've put all my money in that and made 200%, oh, just think of how I could retire."

It is the whole illusion of the appearance of easy money. And if anything, I'm gonna say it actually makes stuff like a McDonald's more attractive. It's all about cash flow. Cash flow drives the bus. And just stay on the bus. You don't need big numbers to create big wealth. So as we wrap up, we have a bonus for those who hung in there and listened to the whole thing.

We haven't done one of these in a while, but we have almost finished a new report, and it will go into more depth of everything we talked about and then some. It should be out sometime in the next few weeks. All you have to do is subscribe to our newsletter, and then you will automatically receive the McDonald's deep dive.

With that, thanks for listening. Look forward to episode 63 of The Dividend Mailbox.

If you enjoyed today's podcast, please leave us a review and subscribe. If you would like more information regarding dividend growth or our investment strategy, please visit growmydollar.com. There you will find previous episodes and also our monthly newsletter. If you have any questions or anything to add to today's episode, please email Ethan, E-T-H-A-N, @growmydollar.com.

Past performance does not guarantee future results. Every investor should consider whether an investment strategy is right for them and all the risk involved. Stocks, including dividend stocks, are volatile and can lose money. Denewiler Capital Management may or may not have positions in the publicly traded companies mentioned herein.