PepsiCo, Inc. (PEP), McDonald’s Corporation (MCD): A Good Place To Start

Finding high-quality dividend stocks doesn’t have to be difficult or time consuming. By looking for stocks with underlying financial strength and reliable payouts, even beginning investors can unlock exceptional returns for years on end. Today, let’s look at two dividend stocks with low risk and high dividend growth — an ideal combination for even the most novel investor.

1. PepsiCo, Inc. (NYSE:PEP)
Not only are PepsiCo, Inc. (NYSE:PEP) and its Frito-Lay business some of the most recognizable brands in the world, but the stock is also a dividend aristocrat. The S&P 500’s Dividend Aristocrats list measures the performance of the top blue-chip companies that have consecutively raised their dividends for at least the part 25 years — although in PepsiCo, Inc. (NYSE:PEP)’s case, it just celebrated its 41st straight year of dividend increases. The company recently grew its dividend by 6% to an annual payout of $2.27 per share.

PepsiCo, Inc. (NYSE:PEP) enjoys a rich history of rewarding its shareholders, having paid a dividend every year since 1952. In fact, the stock has returned more than $58 billion to stockholders over the past 11 years alone through dividends and share buybacks.

The stock currently boasts a dividend yield of 2.7% and a payout ratio of 54%. The payout ratio is important because it tells investors how much of the company’s net income the company is giving back to shareholders.

2. McDonald’s Corporation (NYSE:MCD)
This fast-food chain also earns high marks as a dividend aristocrat. McDonald’s Corporation (NYSE:MCD) has boosted its dividend every year since 1976 and now rewards investors with an annual dividend amount of $3.08 per share. Similar to PepsiCo, Inc. (NYSE:PEP), the McDonald’s Corporation (NYSE:MCD) brand is recognized around the world. Today, the Golden Arches serve more than 69 million customers in 119 countries every day.

Shareholders also benefit from the fact that franchises own about 80% of McDonald’s Corporation (NYSE:MCD) restaurants worldwide. This franchise model creates steady profits for the company and its shareholders, because instead of spending capital on restaurants, McDonald’s Corporation (NYSE:MCD) collects rent payments and service fees from its franchise owners.

The stock currently boasts a dividend yield of 3% and a payout ratio of 55%. Both McDonald’s Corporation (NYSE:MCD) and PepsiCo, Inc. (NYSE:PEP)’s dividends look safe at their current payout rates, which make them strong buys for income investors new and old.

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The article 2 Dividend Stocks for New Investors originally appeared on Fool.com and is written by Tamara Rutter.

Fool contributor Tamara Rutter has no position in any stocks mentioned. The Motley Fool recommends and owns shares of McDonald’s and PepsiCo.

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