While the US stock market breaks record highs again, the Dow Jones Industrial Average is once again lagging. While the S&P 500 and Nasdaq have posted 10% and 16% gains respectively, the Dow’s up a mere 5.3%.
That’s not particularly surprising, as US growth becomes increasingly led by tech stocks. But the performance gap tells us something important. The Dow Jones is increasingly behaving like an income and resilience index, not the best all-round gauge of the market.
Naturally, that’s because it holds just 30 blue-chip companies and is price-weighted, so a few expensive shares can matter more than the biggest businesses by market value.
But while high-flying tech growth stories take up all the headlines, the Dow could be of particular interest to British income investors.
A different approach to US growth
The Dow’s 30 blue-chip companies cover all industries except transportation and utilities. Unlike the S&P 500, which holds 500 companies and is market-cap weighted, the Dow’s best understood as a quality-and-cash-flow index.
In that way, it’s more similar to the FTSE 100, reflecting companies that can usually keep paying dividends and weather rough patches.
A few examples include Coca-Cola, Procter & Gamble, Verizon, and McDonald’s (NYSE: MCD).
Let’s take a closer look at why McDonald’s is just the kind of stock for a UK income investor to consider.
Targeting longevity, not hype
McDonald’s is a classic Dow name, exhibiting the income and defensive characteristics that define the index.
The world-famous fast food giant has raised its dividend for 49 consecutive years since 1976, a long record for a US stock. The company declared a quarterly cash dividend of $1.86 per share last month (May), with a forward dividend yield of 2.66%.
Plus, it has a more defensive earnings profile than many cyclical companies because its franchise model generates royalty and rent-like income.
UK income investors might recognise some of these characteristics from their favourite FTSE stocks.
But do its strengths outweigh the risks?
Strong earnings in a tough climate
As with any company, McDonald’s isn’t entirely risk-free. In the current economic climate, both inflation and unemployment are at risk of rising. That could limit consumer spending, or drive customers to opt for lower-cost alternatives, hurting McD’s profits.
But for now, it’s doing well. Diluted earnings per share (EPS) have almost doubled in five years, up from $6.05 in 2020 to $11.95 in 2025.
That adds extra weight to the income story, with a dividend payout ratio of 59.9%, indicating strong earnings coverage.
The bottom line
If you use the Dow as a market signal, it’s worth asking a few simple questions:
- Is the rally being driven by a handful of expensive stocks?
- Are defensives outperforming because growth’s slowing?
- Is the index telling me about the economy, or just about blue-chip sentiment?
That matters because the Dow isn’t a broad market snapshot like the S&P 500. It’s a narrower, older, more income-friendly picture of the market.
For me, that makes the Dow still useful, but in a different way. It’s less a guide to where the market is going next, and more a reminder of which big US firms investors trust when the mood gets choppy.
Should you invest £5,000 in McDonald's right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if McDonald's made the list?
Mark Hartley does not hold any positions in the companies mentioned.
