HRL vs PEP: Dividend Comparison
Dividend data as of
Hormel Foods Corp /De/ (HRL) and Pepsico Inc (PEP) are both in the Consumer Staples sector, making them natural rivals for dividend investors. HRL offers a significantly higher 4.77% yield compared to PEP's 3.37%, a gap of 1.41%. For dividend growth, HRL leads with a 5-year CAGR of 12.1% versus PEP's 7.3%. HRL holds the edge in dividend safety with a "Safe" rating. PEP is a Dividend Aristocrat with 27 years of consecutive increases.
Verdict
Yield Analysis
HRL yields 1.41% more than PEP. In dollar terms, HRL pays $1.16/share vs PEP's $5.62/share annually.
Dividend Growth
HRL: Dividend growth is accelerating — the 3-year CAGR of 18.6% exceeds the 5-year rate of 12.1% and the 10-year rate of 11.5%.
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
HRL: The payout ratio of 1% is well within sustainable levels, leaving room for future increases. Earnings cover the dividend 0.8x.
PEP: The payout ratio of 94% is elevated, which may indicate the dividend could be cut if earnings decline. Earnings cover the dividend 1.1x.
Estimated Annual Dividend Income
Based on current dividend yields. Actual income may vary.
What does $10,000 buy in HRL vs PEP today?
At $23.74 per share, $10,000 buys about 421.2 shares of Hormel Foods Corp /De/ (HRL). Each share pays $1.16 per year in dividends, so the position starts out generating roughly $489 per year — about $41 a month.
At $166.01 per share, $10,000 buys about 60.2 shares of Pepsico Inc (PEP). Each share pays $5.62 per year in dividends, so the position starts out generating roughly $339 per year — about $28 a month.
HRL is the larger income stream from day one: $150 per year more on the same $10,000 invested.
What could $10,000 of HRL or PEP income look like in 10 years?
Hormel Foods Corp /De/ (HRL) has raised its dividend about 12.1% a year over the past five years. If that pace held, the $477 per year that $10,000 generates today at the current 4.77% yield would reach $1,493 per year by 2036 — a 14.9% yield on the original cost.
Pepsico Inc (PEP) has raised its dividend about 7.3% a year over the past five years. If that pace held, the $337 per year that $10,000 generates today at the current 3.37% yield would reach $679 per year by 2036 — a 6.8% yield on the original cost.
On those trailing rates, HRL pays more in 2036: $1,493 versus $679 per year. The projection assumes each five-year growth rate persists and no dividends are reinvested — real payouts will differ.
When would PEP's dividend growth overtake HRL's higher yield?
It doesn't, on the trailing numbers. Hormel Foods Corp /De/ (HRL) yields more today (4.77% vs 3.37%) and has also grown its dividend at least as fast (12.1% vs 7.3% a year over five years). Unless PEP accelerates its raises or HRL stumbles, PEP never closes the income gap — HRL wins on both current income and growth.
Can HRL and PEP afford their dividends?
Hormel Foods Corp /De/ (HRL) earns $0.87 per share against $1.16 paid out in dividends — 0.8x coverage (a 1% payout ratio).
Pepsico Inc (PEP) earns $5.99 per share against $5.62 paid out in dividends — 1.1x coverage (a 94% payout ratio).
PEP's wider coverage leaves more cushion if earnings dip. As a rule of thumb, coverage below about 1.5x (a payout ratio above ~65%) is where a dividend starts to look stretched — worth watching for HRL if earnings weaken.
Which fits an early-retirement income portfolio better, HRL or PEP?
For income you need right now, Hormel Foods Corp /De/ (HRL) leads: $100,000 invested today pays about $398 a month at the current 4.77% yield, versus $281 a month from Pepsico Inc (PEP) at 3.37%.
HRL also leads on dividend growth (12.1% vs 7.3% a year over five years), so the trailing numbers favor it on both fronts.
On consistency: PEP has raised its dividend 27 consecutive years.
Many income investors simply hold both — the mix pairs current yield with growth and spreads single-name risk. Whichever way you lean, dividends are never guaranteed; recheck the payout each quarter rather than setting and forgetting.
$10,000 with DRIP: projected annual income
If each holding keeps raising its dividend at its real 5-year rate and every payment is reinvested, a $10,000 position pays $2,380/yr in HRL vs $946/yr in PEP by year 10.
Assumes dividends are reinvested at the current yield and grow at each holding's trailing 5-year dividend CAGR. A projection, not a prediction — no price appreciation modeled.
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