We’re Buying More of These Two Stocks on Monday

Increased inflation and the labor shortage have been major financial topics over the last several months.

The subjects are related: Because not enough U.S. workers are applying for jobs, businesses have had to lift wages to fill positions; and the higher price of labor has contributed to inflation’s advance.

Even with wages going up, I’m not sure how many workers out there have been getting raises of 7% or more … so it makes me pretty happy that our Income Builder Portfolio just got those kinds of pay hikes from Lockheed Martin (LMT) and McDonald’s (MCD).

The companies announced the raises — as well as multibillion-dollar stock buyback programs — on Thursday, Sept. 23 … and all that good news played a role in my decision to add to the IBP’s positions in both industry leaders.

Come Monday, Sept. 27, I’ll be executing purchase orders for additional shares of MCD and LMT on behalf of this site’s co-founder (and IBP money-man) Greg Patrick. The total buy will be about $1,000.

Launched at the start of 2018, the IBP owns 44 companies and is projected to generate more than $3,100 in annual income. (See the entire portfolio, as well as links to every IBP-related article, HERE.)

I’m Lovin’ It!

This latest dividend boost by McDonald’s was hardly unexpected — the company has been raising its payout annually for decades.


McDonald’s soon will join the very select club of Dividend Kings with half-century streaks of dividend growth. Given how often company executives call the dividend one of their highest priorities, it’s almost time to start polishing the crown.

Since we initiated our position back in September 2018, MCD has pretty much moved in lockstep with the broader market.

I’ll gladly take that slight outperformance from a stock with a dividend yield that’s nearly a percentage point higher than the S&P 500 Index.

We added to our MCD stake last December, and I look forward to the upcoming purchase taking the total amount invested in McDonald’s to about $2,000 — as is the case with the IBP’s other multi-year positions.

As a business, McDonald’s obviously needs no introduction … but I always enjoy presenting an updated version of my favorite MCD-related graphic: QSR Magazine’s list of top burger chains by sales.


You’re reading that right: Mickey D’s had more sales in 2019 — $40.4 billion worth — than the next 10 hamburger chains combined!

Few companies dominate an industry as completely.

Like so many other businesses, McDonald’s was adversely affected during the depths of the COVID-19 pandemic, but the Golden Arches have bounced back strongly.

The company’s Q2 2021 earnings report showed that both EPS and sales have surpassed pre-pandemic levels.


Other financial metrics, such as return on invested capital and operating margin, also were very strong.

Looking To Rebound

Lockheed Martin’s raise marks its 19th consecutive year growing the dividend.

Although the defense contractor doesn’t have as long a streak as McDonald’s does, LMT has grown its payout much more aggressively over the last decade.

Another difference between the two stocks we’ll be buying Monday: While MCD has matched the market’s performance, LMT has struggled mightily since the depths of the pandemic.

Lockheed had a 2-to-1 advantage over the S&P 500 Index in the five years leading up to the coronavirus crash of February-March 2020.

After doing OK for a couple months once the crash ended, however, Lockheed has been a big-time loser since May 5, 2020.

As a result, the LMT position that the Income Builder Portfolio has built through buys in May 2018, May 2019 and July 2020 has a total return of only about 9.5%.

Sometimes the market just gets down on a company even if it’s performing pretty well.

As the following graphic from Simply Safe Dividends shows, Lockheed Martin’s earnings and sales have steadily grown over the last two years — and they never even really cratered during the worst days of the pandemic.


Lockheed has continued winning big-money projects from the Pentagon, too.

Just a couple of weeks ago, the company was awarded a $2 billion contract to provide logistics support of delivered F-35 Lightning II fighter planes.

F-35 Lightning II (lockheedmartin.com)

Rather than get upset when fundamentally sound companies see stock-price declines, long-term Dividend Growth Investing practitioners can be happy to pick up shares at lower prices and higher yields.

One thing for sure: Both Lockheed Martin and McDonald’s are high-quality companies.

In addition to selecting these blue-chip industry leaders for the IBP, I’m happy to have built sizable MCD and LMT positions in my personal portfolio.

Wrapping Things Up

One way to fight inflation is to own numerous stocks that consistently grow dividends at inflation-beating rates — and that’s something the Income Builder Portfolio has done for nearly four years now.

So obviously, we’re thrilled to get two more outstanding raises from McDonald’s and Lockheed Martin.

It’s like getting a salary increase … without even having to work!

In my post-buy article, scheduled to be published on Tuesday, Sept. 28, I will take an in-depth look at each company’s valuation.

As always, investors are urged to conduct their own due diligence before buying any stocks.

Note: Along with writing articles about the IBP, I make videos for the Dividends And Income Channel on YouTube. Check out my most recent video HERE.

— Mike Nadel

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