I want to retire early. To reach my goal, I chose to invest in dividend paying stocks that not only pay a dividend but also raise it every year at a rate far higher than inflation. This not only protects my income from inflation, but also makes it grow.
Last week, McDonald’s, my current biggest holding, as increased its dividend payment by 5% to 85 cents per share per quarter. With 65 shares in hand, this means that my quarterly dividend check will go from 52.65$ to 55.25$ and I had nothing to do except waiting for that increase to be announced.
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McDonald’s pays and increase its dividend every year since 1976. That’s 38 straight years of dividend increase!!! Over that period, based on www.buyupside.com calculator, McDonald’s dividend growth has been 135,576% or 20,59% annually.
Over the last 5 years, McDonald’s dividend grew from 0,50$ per share to 0.85$ per share. The dividend growth was 10% from 2009 to 2010, 10.9% from 2010 to 2011, 14.75% from 2011 to 2012, 7% from 2012 to 2013, 5.2% from 2013 to 2014 and 5% from 2014 to 2015. Clearly, the dividend growth is decreasing.
Still, a 5% dividend raise is good to get. But I honestly was expecting at least 7% here. Unfortunately, McDonald’s is facing a lot of headwind recently. News have been bad for most of 2014. Same store sale is declining in many stores and if there is growth, it is weak.
McDonald’s management team has recently announced that they would return 20 Billions to shareholders between 2014 and 2016. That’s approximately 20$ per share. During the past five years ended 2013, it has returned about $26 billions to shareholders through share buybacks and dividends. Through Aug 2014, the company has returned $3.2 billion to its shareholders. There are still 17 billions left to distribute!!
At current price (93,93$), McDonald’s offers a juicy 3,62% dividend while its 5 years average as been at 3%. On the P/E side, McDonald’s shares currently trade at 17 times earnings, its 5 years average.
McDonald’s balance sheet is still strong and at current prices, I think it’s a good pick.
Morningstar currently rates McDonald’s as a wide moat stock with a fair value estimate at 98$.
I added 35 shares to my position since July so I’m pretty heavy on McDonald’s right now. I going to stand on the line for a while with that stock but I consider myself a happy shareholder!
Do you own McDonald’s stock? What are your thoughts?
[author] [author_image timthumb=’on’]http://quityourdayjob101.com/wp-content/uploads/2014/03/ID-10050051.jpg[/author_image] [author_info]Hi, my name is Allan. I’m the masked blogger. Like you I’m a modern slave, prisoner of a 9@5 job in Corporate America. They told us when we were young that we would live in a society of leisure and that technology would permit us to work only a couple of hours per day. But we live in a society of stress and uncertainty. My situation could be a lot worse and I know it. So many humans are suffering on this planet. But a golden cage remains a cage anyway. At least, I have an escape plan. I will retire before 45 years old over my passive income. This is a dream that is so powerful that I will make sure it happens. To build my wealth, I mainly invest in undervalued dividend growth stocks. [/author_info] [/author]
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