Two of the highest-quality dividend-paying companies in the stock market are Walmart (NYSE:WMT) and McDonald's (NYSE:MCD). Both have been paying dividends since the 1970s. Even more incredibly, they have both increased their dividends every year since they paid their first dividends.

Both companies have proved to be rewarding dividend stocks over the last decade -- and even in the last year alone. But which company appears to be the better dividend stock today?

A chalkboard sketch of a bar chart with an arrow highlighting a growth trend

Image source: Getty Images.

Walmart

Dividend Yield

Payout Ratio

5-Year Average Annual Dividend Growth 

1.8%

47.5%

2%

Data source: Morningstar and Walmart.

Impressively, Walmart has increased its dividend for 46 years straight. Its most recent dividend increase was announced in February, when it boosted its quarterly payout from $0.51 to $0.53, or $2.12 annually. This new dividend translates to a yield of 1.8%.

"Dividends remain a key part of our capital allocation after we invest in the business to sustain long-term success," said CFO Brett Biggs in a company press release about the increase. And the dividend hike, he said, "reflects the confidence we have in our future growth and strong balance sheet."

Notably, Walmart's 47.5% payout ratio, or the percentage of its earnings it distributes in dividends, is lower than McDonald's. This gives Walmart's dividend more wiggle room than McDonald's. But the retail giant's dividend is lacking when it comes to growth. On average, it has increased by just 2% annually over the past five years.

McDonald's

Dividend Yield

Payout Ratio

5-Year Average Annual Dividend Growth

2.4%

59%

8%

Data source: Morningstar and McDonald's.

McDonald's boasts a much higher dividend yield than Walmart -- as a percentage of its stock price, it currently come out to 2.4%. Some of its higher yield today is attributable to its outsize dividend growth versus Walmart's. On average, its dividend has increased at a rate of 8% annually over the last five years, easily beating Walmart's 2% annualized growth.

McDonald's kept up this growth rate when it announced its latest dividend increase earlier this month, boosting its quarterly payout by 8% to $1.25, or $5 annually. 

Highlighting the company's strong dividend history, it has now increased its dividend for 43 consecutive years.

The verdict

While McDonald's does have a higher payout ratio than Walmart, potentially making its dividend growth comparatively harder to sustain if its earnings take a hit, the restaurant chain seems to have the upper hand on Walmart overall. Not only does McDonald's have a much better dividend yield and strong dividend growth, but analysts forecast its earnings per share will grow at an average rate of 6.7% annually over the next five years. For Walmart, the consensus forecast is for 4.6% annualized growth in the key profitability metric. 

I'm betting McDonald's is the better pick for dividend investors.