COST vs PEP: Dividend Yield, Growth & Safety Comparison
Costco Wholesale Corp /New (COST) and Pepsico Inc (PEP) are both in the Consumer Staples sector, making them natural rivals for dividend investors. PEP offers a significantly higher 3.37% yield compared to COST's 0.52%, a gap of 2.85%. For dividend growth, COST leads with a 5-year CAGR of 20.9% versus PEP's 7.3%. COST holds the edge in dividend safety with a "Safe" rating. PEP is a Dividend Aristocrat with 27 years of consecutive increases.
Key Metrics Comparison
| Metric | COST | PEP |
|---|
| Dividend Yield | 0.52% | 3.37% |
| Annual Dividend | $5.06 | $5.62 |
| 5-Year CAGR | 20.9% | 7.3% |
| Payout Ratio | 27% | 94% |
| Consecutive Years | 0 | 27 |
| Price | $1015.00 | $166.01 |
Yield Comparison
Pepsico Inc (PEP) currently yields 3.37%, which is solid for the broader market. That's 2.85% more than Costco Wholesale Corp /New (COST), which yields 0.52%. In dollar terms, PEP pays $5.62/share annually versus COST's $5.06/share.
Dividend Growth
Over the past five years, COST has grown its dividend at a 20.9% CAGR compared to PEP's 7.3%. COST: Dividend growth is slowing — the 3-year CAGR of -47.1% trails the 5-year rate of 20.9% and the 10-year rate of 15.8%. PEP: Dividend growth is slowing — the 3-year CAGR of 6.6% trails the 5-year rate of 7.3% and the 10-year rate of 7.4%.
Dividend Safety
COST's dividend safety is rated "Safe." The payout ratio of 27% is well within sustainable levels, leaving room for future increases. Earnings cover the dividend 3.7x. PEP's dividend safety is rated "At Risk." The payout ratio of 94% is elevated, which may indicate the dividend could be cut if earnings decline. Earnings cover the dividend 1.1x. COST's payout ratio of 27% is more conservative than PEP's 94%, suggesting more room for future increases.
Income Comparison
A $10,000 investment in PEP generates approximately $337/year in dividend income, compared to $52/year from COST — a difference of $285/year. At $100,000, that gap widens to $2850/year.
Verdict
- Best for income: PEP
- Best for growth: COST
- Best for safety: COST
Frequently Asked Questions
Which has a higher dividend yield, COST or PEP?
Pepsico Inc (PEP) has a higher dividend yield of 3.37% compared to Costco Wholesale Corp /New (COST) at 0.52%.
Is COST or PEP a better dividend growth stock?
Costco Wholesale Corp /New has the stronger dividend growth with a 5-year CAGR of 20.9%, compared to Pepsico Inc's 7.3%.
Which is safer for dividend income, COST or PEP?
Costco Wholesale Corp /New's dividend safety is rated "Safe" while Pepsico Inc is rated "At Risk." The payout ratio of 27% is well within sustainable levels, leaving room for future increases. Earnings cover the dividend 3.7x. The payout ratio of 94% is elevated, which may indicate the dividend could be cut if earnings decline. Earnings cover the dividend 1.1x.
How much income does $10,000 in COST vs PEP generate?
A $10,000 investment in COST generates approximately $52/year in dividends, while the same amount in PEP generates about $337/year.
Is COST or PEP a Dividend Aristocrat?
Pepsico Inc is a Dividend Aristocrat with 27 consecutive years of increases. Costco Wholesale Corp /New does not currently qualify for aristocrat status.
Which has a lower payout ratio, COST or PEP?
Costco Wholesale Corp /New has a lower payout ratio of 27% compared to Pepsico Inc's 94%. A lower payout ratio generally indicates more room for dividend growth and better sustainability.
COST vs PEP: which is better for retirement income?
It depends on your priorities. PEP for current income, COST for dividend growth, COST for safety. Many retirement investors hold both for diversification.
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