Here’s how you can generate dependable streams of cash from your investments.
If you would like to build lasting wealth in the stock market, consider investing in businesses with long histories of rewarding their shareholders with rising cash payouts. Companies that grow their dividends consistently can create reliable streams of passive income and significant share price gains, both of which can make you richer over time.
If these benefits of dividend investing sound intriguing, read on to learn about two excellent stocks that are worth considering today.
1. McDonald’s
Many things have become more expensive in recent years, so cash-strapped consumers are searching for bargains wherever they can. Increasingly, they’re finding them at McDonald’s (MCD 0.64%).
The restaurant chain’s reputation for low prices and tasty food is serving it well during today’s challenging economy. McDonald’s value-priced fare, such as its $5 Meal Deals, is proving popular among cost-cutting shoppers. The company’s massive scale gives it purchasing power over suppliers, which allows it to undercut many of its smaller competitors and pass the savings on to diners.
Speed, convenience, and digital expertise further widen McDonald’s competitive moat. Commuters have long appreciated the burger chain’s drive-thru lanes and quick service. A popular mobile app makes placing orders even faster, along with providing the option of having your food delivered to you.
The chain has plenty of room for global expansion. Management expects to grow its worldwide store count to 50,000 by the end of 2027, up from 41,822 stores at the end of 2023.
More restaurants should mean more profits, and bigger dividend payments for shareholders. The franchise-based business model typically produces operating margins of more than 40%. McDonald’s passes these earnings on to investors via dividend payments that have grown steadily for nearly 50 years. Its shares currently yield a solid 2.3%.
2. Home Depot
Though inflation remains troublesome, it is beginning to moderate. The Federal Reserve, in turn, believes the time has come to start rolling back the interest rate hikes it implemented to slow the increases in the prices of goods and services.
Lower interest rates often lead to lower mortgage rates, which would be a boon for the beleaguered U.S. housing market. Home Depot‘s (HD 0.46%) shareholders stand to profit handsomely from these promising trends.
With higher costs driving consumers to delay home improvement projects, Home Depot shifted its focus to contractors and other professionals. The retailer acquired SRS Distribution for $18 billion in June to bolster its roofing, landscaping, and pool equipment offerings. Management estimates the deal will expand its total market opportunity to $1 trillion.
Moreover, the home improvement chain’s do-it-yourself business might be about to get a long-awaited boost. Lower mortgage rates will make it easier for people to buy new homes. Lower borrowing costs should also make larger projects more affordable. These dynamics ought to lead to higher sales and profits, as well as larger dividends for investors. (Its shares already yield a stout 2.2%.)
With its 15-year dividend-growth streak likely to extend well into the future, Home Depot’s stock is a smart buy today.
Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot. The Motley Fool has a disclosure policy.
