Better Dividend Stock: McDonald’s vs. Starbucks

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.

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%

McDonald’s is a Dividend Aristocrat

McDonald’s has increased its dividend every year since it first paid one in 1976.

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.

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%

Starbucks’ Dividend History

Unlike McDonald’s, Starbucks has only paid a dividend for the past three years.

Drag picture to placeholder or click icon to add

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.

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.

The Top Dividend Stocks For The Next Decade