Better Dividend Stock Today: McDonald's vs. Starbucks?
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Transcript of Better Dividend Stock Today: McDonald's vs. Starbucks?
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Better Dividend Stock: McDonald’s vs. Starbucks
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3 Reasons to Love Dividend Stocks
Historically, dividend stocks have outperformed non-dividend stocks.
Reliable dividend stocks can offer you a steady income stream, despite market volatility.
Dividend stocks often have higher quality earnings.
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McDonald’s (NYSE: MCD)
• McDonald’s pays an annual dividend of $3.24 per share.
• The stock’s dividend yield of 3.19% is above the S&P 500, which yields 1.94%.
Dividend Yield: 3.19%
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McDonald’s is a Dividend Aristocrat
McDonald’s has increased its dividend every year since it first paid one in 1976.
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McDonald’s Payout Ratio
• The fast food chain currently has a payout ratio of 56.9%
• This means McDonald’s pays out more than 56% of its net income as dividends to shareholders.
• Typically, anything below 80% is sustainable.
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Starbucks (Nasdaq: SBUX)
• Starbucks pays an annual dividend of $1.04 per share.
• Starbucks’ dividend yield of 1.40% is below that of the S&P 500.
Dividend Yield: 1.40%
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Starbucks’ Dividend History
Unlike McDonald’s, Starbucks has only paid a dividend for the past three years.
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How Sustainable is Starbucks’ Dividend?
• Over the past three years Starbucks has grown its dividend more than McDonald’s during the same period.
• However, during the past year Starbucks paid more in dividends than it earned. While this was partially due to increased costs, over time this is not sustainable.
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And the dividend champion is…
If you’re investing for income, McDonald’s is the better pick because it offers an annual dividend
above 3%, which is more than most high interest savings accounts today. While Starbucks is aggressively growing both its business and
dividend, McDonald’s history of reliable payouts makes it a safer bet for investors.
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The Top Dividend Stocks For The Next Decade