Few investors need to be told that stock prices, even for some of the market's sturdiest blue chips, are down these days. But that makes compelling buys out of the better-managed companies that pay regular dividends. And when those solid businesses declare dividend raises, their stocks become that much more attractive.
Two excellent examples of this in recent times are McDonald's (MCD -0.05%) and Starbucks (SBUX 1.00%). On top of that, investors who want to add to their passive income pile still have time to take advantage of the two hikes. Here's more about both.
1. McDonald's
McDonald's, almost indisputably the most recognized restaurant chain on the planet, has actually been a fairly resilient stock of late. It's "only" fallen 8% in price year to date, compared to the nearly 23% swoon of the S&P 500 index.
What helps is the company's admirable performance not only this year, but throughout the coronavirus pandemic -- a period that generally hit the restaurant industry hard. Another element keeping shareholders aboard is McDonald's generous dividend, which is constantly on the rise. Earlier this month the company maintained its Dividend Aristocrat status with a 10% lift in the quarterly payout to $1.52 per share.
At the same time, the company continues relentlessly marching down the growth path. As a reliable operator of drive-thru restaurants, McDonald's was a popular choice for hungry people during the worst days of the pandemic. This momentum has continued, with those customers coming back for the convenience and familiarity.
As for the bottom line, well-considered efforts at greater automation, notably those ordering kiosks that are now standard in its restaurants, have helped keep profit margins high.
The Golden Arches should continue to shine brightly. Collectively, analysts tracking the stock are anticipating Mickey D's will grow its net profit by almost 6% this year over 2021, despite a modest slump in revenue. Both metrics should head north in 2023, at 7% for profitability and 3% on the top line.
McDonald's new dividend is to be paid on Dec. 15 to stockholders of record as of Dec. 1, giving the investing public plenty of time to buy into the increased payout. On the restaurateur's latest closing stock price, the raised amount would yield 2.5%.
2. Starbucks
In many ways, Starbucks is the McDonald's of coffee, offering largely standardized menu items served at an ever-ballooning number of outlets. It's also a brand that's globally recognized and familiar at this point, everywhere from Bangor, Maine to Beijing, China.
Coffee isn't a particularly expensive beverage to make and sell, so Starbucks is reliably profitable and generates loads of cash. From this it pays a quarterly dividend that has been on the investor menu since it was first declared in 2020. It's also gotten an increase every year; the 2022 edition is an 8% hike to $0.53 per share, declared at the end of September.
Although it did relatively well on a fundamental level during the pandemic, like McDonald's, Starbucks has hit some potholes lately. Business in China, a crucial foreign market, is in a long slump due to the country's many coronavirus restrictions on movement and commerce. Inflation is also putting the squeeze on the company, as prices for certain inputs such as milk stay stubbornly high.
But China isn't going to maintain a zero-Covid policy forever, and those inflationary pressures should ease. All the while, Starbucks will continue to expand, expand, and expand. In fact, just last month the company announced it had opened its 6,000th store in the massive Asian country.
Analysts believe the current challenges will waft away like the steam from a fresh latte, leaving Starbucks plenty of space to grow. On average, these prognosticators are modeling an almost 12% year-over-year rise in revenue for 2023, and a sharp 17% improvement in net profit.
The coffee slinger will first dispense its raised dividend on Nov. 25 to stockholders of record as of Nov. 11. That gives it a yield of 2.4% at the current share price.
