Has the market’s recent volatility got you worried about your high-flying growth stocks? You’re not alone.
Another round of stimulus checks looks like it’s in the works, but this may also be the last of them, and we still don’t know how well the economy can stand on its own. This might be a smart time to dial back your exposure to more aggressive names and ratchet up your exposure to reliable, income-generating picks.
With that as the backdrop, here are three of the best dividend stocks to add to your portfolio — at least until the market settles down.
1. McDonald’s
Dividend yield: 2.5%
On the surface, it looks like a fast-food chain. Under the hood, however, McDonald’s (NYSE:MCD) is the real estate company many observers say it is. Of the 39,198 McDonald’s restaurants on the planet as of the end of last year, only 2,677 of them were owned and operated by the company itself. The other 36,521 were franchised to …. well, franchisees.
That’s not unusual within the fast-food business. Most McDonald’s franchisees, however, don’t actually own the real estate they’re utilizing. The parent owns it and rents it to operators at current market rates. That’s in addition to royalties the franchisees pay on the sales they drive. McDonald’s franchisees often argue their total costs are well above the industry’s average. Indeed, it’s become a contentious point between the company and its franchisees.
The fact is, though, franchisees need the parent more than the parent needs any particular franchisee. McDonald’s is the world’s most recognized restaurant chain, and the company has masterfully leveraged its powerful brand name and reach to remain the dominant player in the business. Although it’s expensive to do so, most operators are better off paying McDonald’s steep fees than they would be working with another fast-food outfit.
Those recurring, reliable rent and royalty payments make McDonald’s business model an ideal one for generating income to pass along to shareholders. And it’s done exactly that. This company has increased its annual dividend payout for 44 consecutive years now.
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