McDonald’s (MCD) Just Gave Me a Big Raise!

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For almost the past 10 years, my wife and I have slowly been building a side income stream. This source of extra income is constantly growing month by month and year by year.

This extra source of income is our dividend income portfolio of stocks … that will pay us over $2,400 this year! Next year, we should earn around $3,000 and even more the year after that.

This growth comes from many different places. First of all, we have been investing $10,000+ into dividend stocks the past several years. By investing $10,000 a year, we are growing our future annual dividend income by at least $250 … likely more.

In addition to new money, we feel it is very important to reinvest the dividends we are earning. So this year, we will have reinvested that $2,400 we earned. That is likely another $60 to $100 of future income each year.

The last way that we are growing this income stream is the easiest and is what makes dividend stocks a great side income stream. Almost every company that we own shares of dividend stocks in will give us an annual raise. Yep, that’s right. We don’t have to lift a finger … just sit back and collect a raise.

Some of these raises are small … maybe around 2%. While others are over 20%! On average though, we grow our dividend income by 5% to 7% per year from these raises. That is another $120 to $150 of extra income each year.

The most recent dividend increase from a stock we own was from McDonald’s Corporation (MCD).

MCD Shareholders Get a 7.45% Raise

McDonald’s Corp. (MCD) recently announced an annual dividend increase. The company has been consistently raising dividends for the past 41+ years.

Company shareholders will now receive $1.01 in quarterly dividends for each share they own … instead of $0.94 paid previously. This increase meets our desired dividend growth rate of over 6%.

The latest increase bumps the annual dividend for MCD up to $4.04 per share compared to $3.76 just last quarter.

Overall, that is a 7.45% increase in dividend income!

How Much Extra Income?

We currently only own 37.605 shares of MCD in our Money Sprout Index.

The majority of the shares we own in McDonald’s were purchased from our Fidelity account 8 years ago. This company was part of the original foundation we built for our dividend income portfolio.

This latest dividend increase has pushed our 12 month forward dividend income for MCD up to $151.92, compared to $141.39 last quarter.

That is an annual dividend income increase of $10.53!

Whether they are large or small, all of these increases can really add up over the months and years.

With this latest increase by McDonald’s, along with recent stock purchases, dividend reinvestment, and other company announced increases … our annualized forward dividend income has risen to $2,747.95.

Dividend Growth for MCD

We have owned shares of McDonald’s (MCD) for almost 8 years now. It has been one of the best dividend paying stocks that we have owned and continues to grow like crazy! Now if all companies treated their shareholders this way …

The company has been raising dividends for the past 41+ years. And the growth during that time has been outstanding!

Take a look at the annual dividend payments since 2009 –

  • 2009 – $2.05
  • 2010 – $2.26
  • 2011 – $2.53
  • 2012 – $2.87
  • 2013 – $3.12
  • 2014 – $3.28
  • 2015 – $3.44
  • 2016 – $3.61
  • 2017 – $3.83 (projected)

Note – The 2017 dividend has been prorated to reflect a dividend increase during the year (after the third quarter payout).

As you can tell from the numbers above, MCD dividends have been raised consistently over the past several years with awesome growth.

Typically, we look for stocks with a 5-year or 10-year dividend growth rate (DGR) of 6% or higher. McDonald’s has shown much higher DGR’s above 6% over the past 10+ years.

Here are a few average growth rates for shares of McDonald’s

  • 1 Year DGR – 8.16% (2016 to 2017)
  • 5 Year DGR – 11.43% (2012 to 2017)
  • 8 Year DGR – 13.94% (2009 to 2017)

Overall, the dividend growth of the company has been well over double digits … except for this past year! Even though this most recent increase fell below double digits, an 8%+ increase is awesome.

Note – We calculated the 8 year DGR (instead of 10 year) as that is the number of years we have owned shares in the company.

McDonald’s – Buy, Sell, or Hold?

We started buying shares of McDonald’s (MCD) back in October 2010 when we purchased 13 shares and added another 18 shares in 2014. Then starting in late 2014, we began buying partial shares of McDonald’s through our LOYAL3 account.

In May 2017, LOYAL3 shut down so we transferred our partial shares over to Fidelity to be consolidated with our shares purchased in 2010 and 2014.

Since buying our first 13 shares in 2010, we have earned $606.93 in dividends from McDonald’s. The majority of those dividends were reinvested back into an additional 5.605 shares through DRiP.

Here are a few stats from owning stock in McDonald’s

  • Total Investment – $2,820.97
  • Shares Purchased – 32.000
  • Dividends Earned – $606.93
  • DRiP Shares – 5.605

To date, we have earned back 21.51% of our overall investment in the company … just from dividends! Companies like this make dividend investing fun … and very profitable.

We are also earning a solid 5.39% yield on cost on our shares of MCD. And that is only going to grow … as time goes by and we keep reinvesting through DRiP and the company gives us annual raises.

While we are very pleased with our investment in McDonald’s over the past 8 years … it doesn’t necessarily mean we are buying new shares however.

At the time of this writing, MCD meets SOME of our stock screen criteria based on the following metrics –

  • Current Yield – 2.35%
  • Payout Ratio – 61.44%
  • P/E Ratio – 26.14

The company meets some of the criteria that we look for when picking stocks. For example, the company does have a current yield >= 2% and dividend growth rates for 5 and 10 years way over the 6% threshold we look for.

However the payout ratio is over 60% (just barely) and the P/E ratio is well above the 20 or below mark we look for. Plus MCD is trading just below it’s 52-week high. I like purchasing bargains and would prefer to put our investment dollars into a different group of stocks at this time.

Based on all of this, we have MCD as a solid HOLD for now. If the company were to ever announce a dividend cut … then we would sell all of our shares in the company, although that doesn’t look like it would happen for some time.

For now … we hold our shares and will continue to collect $150+ a year from the company!

Full Disclosure – At the time of this writing, we owned shares in the following stocks noted in this post – MCD. The material above is not a recommendation to buy. Please do your own research on a company before deciding to invest.

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