For investors looking for more income in their portfolio to help mitigate some risk following a year in which market indexes have soared, two quality dividend stocks to consider are McDonald's (NYSE:MCD) and Mastercard (NYSE:MA). Both companies have a long track record of annual dividend increases and both have announced dividend increases in recent months.
Here's a closer look at these two dividend stocks.
McDonald's: An 8% increase and a 2.6% dividend yield
Fast-food giant McDonald's announced its latest quarterly dividend on Sept. 19. The longtime dividend payer boosted its cash payout by 8% to $1.25 per share. This translates to $5 annually — or a 2.6% dividend yield.
While this single-digit percentage dividend growth may not get investors jumping out of their seats, it looks solid when viewed alongside the company's impressive dividend history and meaningful dividend yield. The company has raised its dividend for 43 consecutive years. Further, McDonald's dividend yield is well over the average dividend yield of stocks in the S&P 500, which is currently 2%.
Paying out only 62% of its earnings in dividends, McDonald's dividend looks very sustainable. Further supporting it is the company's strong fundamentals. McDonald's boasts robust same-store sales growth. Sales at stores open for more than 13 months were up 5.9% year over year in the company's third quarter of 2019, highlighting how its effort to revitalize its stores with remodels and improved technology is working.
Overall, McDonald's offers investors a well-rounded dividend with a thriving business to back it up for years to come.
Mastercard: A 21% increase and a 0.6% dividend yield
Credit card company Mastercard is a dividend stock of a different breed than McDonald's. Mastercard pays out a small dividend yield but boasts a rapidly growing dividend.
The company announced a 21% increase to its quarterly dividend on Dec. 3. This put its quarterly cash payout at $0.40 per share, or $1.60 annually, giving Mastercard a dividend yield of 0.6%.
While the company's dividend history isn't nearly as impressive as McDonald's, Mastercard has notably increased its dividend for seven years in a row. In addition, the company's dividend has grown at an average rate of 20% over the past three years alone.
Also serving as a perk to help make up for Mastercard's paltry dividend yield is the company's strong top- and bottom-line growth. Mastercard's currency-neutral revenue and earnings per share both increased by 16% year over year in Q3.
Finally, Mastercard has an exceptionally low payout ratio, paying out just 20% of its earnings. Its dividend, therefore, has significant breathing room.
With strong business growth and a fast-growing dividend, Mastercard is a good stock for investors looking for reliable and robust dividend growth in the coming years.
Leave a Comment