MCD vs TGT: Dividend Yield, Growth & Safety Comparison
Mcdonalds Corp (MCD) from Consumer Discretionary and Target Corp (TGT) from Consumer Staples offer different dividend profiles for income-focused portfolios. TGT offers a significantly higher 4.01% yield compared to MCD's 2.17%, a gap of 1.84%. For dividend growth, TGT leads with a 5-year CAGR of 9.4% versus MCD's 8.1%. TGT holds the edge in dividend safety with a "Safe" rating. MCD is a Dividend King while TGT is a Dividend Aristocrat.
Key Metrics Comparison
| Metric | MCD | TGT |
|---|
| Dividend Yield | 2.17% | 4.01% |
| Annual Dividend | $7.08 | $4.50 |
| 5-Year CAGR | 8.1% | 9.4% |
| Payout Ratio | 60% | 55% |
| Consecutive Years | 50 | 42 |
| Price | $327.89 | $115.49 |
Yield Comparison
Target Corp (TGT) currently yields 4.01%, which is attractive for the broader market. That's 1.84% more than Mcdonalds Corp (MCD), which yields 2.17%. In dollar terms, TGT pays $4.50/share annually versus MCD's $7.08/share.
Dividend Growth
Over the past five years, TGT has grown its dividend at a 9.4% CAGR compared to MCD's 8.1%. MCD: Dividend growth is slowing — the 3-year CAGR of 7.3% trails the 5-year rate of 8.1% and the 10-year rate of 7.9%. TGT: Dividend growth is slowing — the 3-year CAGR of 1.8% trails the 5-year rate of 9.4% and the 10-year rate of 11.1%.
Dividend Safety
MCD's dividend safety is rated "Moderate." The payout ratio of 60% is moderate. The dividend is currently covered by earnings but leaves less room for growth. Earnings cover the dividend 1.7x. TGT's dividend safety is rated "Safe." The payout ratio of 55% is well within sustainable levels, leaving room for future increases. Earnings cover the dividend 1.8x. TGT's payout ratio of 55% is more conservative than MCD's 60%, suggesting more room for future increases.
Income Comparison
A $10,000 investment in TGT generates approximately $401/year in dividend income, compared to $217/year from MCD — a difference of $184/year. At $100,000, that gap widens to $1840/year.
Verdict
- Best for income: TGT
- Best for growth: TGT
- Best for safety: TGT
Frequently Asked Questions
Which has a higher dividend yield, MCD or TGT?
Target Corp (TGT) has a higher dividend yield of 4.01% compared to Mcdonalds Corp (MCD) at 2.17%.
Is MCD or TGT a better dividend growth stock?
Target Corp has the stronger dividend growth with a 5-year CAGR of 9.4%, compared to Mcdonalds Corp's 8.1%.
Which is safer for dividend income, MCD or TGT?
Mcdonalds Corp's dividend safety is rated "Moderate" while Target Corp is rated "Safe." The payout ratio of 60% is moderate. The dividend is currently covered by earnings but leaves less room for growth. Earnings cover the dividend 1.7x. The payout ratio of 55% is well within sustainable levels, leaving room for future increases. Earnings cover the dividend 1.8x.
How much income does $10,000 in MCD vs TGT generate?
A $10,000 investment in MCD generates approximately $217/year in dividends, while the same amount in TGT generates about $401/year.
Is MCD or TGT a Dividend Aristocrat?
Mcdonalds Corp is a Dividend King (50 years) and Target Corp is a Dividend Aristocrat (42 years).
Which has a lower payout ratio, MCD or TGT?
Target Corp has a lower payout ratio of 55% compared to Mcdonalds Corp's 60%. A lower payout ratio generally indicates more room for dividend growth and better sustainability.
MCD vs TGT: which is better for retirement income?
It depends on your priorities. TGT for current income, TGT for dividend growth, TGT for safety. Many retirement investors hold both for diversification.
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