Which Dow Stock's Dividend Dominates?

Dividend stocks outperform non-dividend-paying stocks over the long run. It happens in good markets and bad, and the benefit of dividends can be quite striking -- dividend payments have made up about 40% of the market's average annual return from 1936 to the present day. But few of us can invest in every single dividend-paying stock on the market, and even if we could, we might find better gains by being selective. That's why we'll be pitting two of the Dow Jones Industrial Average's dividend payers against each other today to find out which Dow stock is the true dividend champion. Let's take a closer look at our two contenders now, Microsoft vs. McDonald's:

Winner: Microsoft, 3-2. Wow, that one was back and forth until the very end, when Microsoft's superior free cash flow levels allowed it to trounce the high-payout McDonald's, which is at risk of a dividend reduction should it find itself struggling to grow. Does that make Microsoft the best investment today? Perhaps not -- shareholders have earned only a third of the return Mickey D's shareholders have enjoyed in the past five years. What do you think? Is Microsoft the better investment today, or does McDonald's offer some non-dividend advantages that make it a superior overall stock for your portfolio?

Source: Daily Finance

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