KO vs PEP: Dividend Yield, Growth & Safety Comparison
Coca Cola Co (KO) and Pepsico Inc (PEP) are both in the Consumer Staples sector, making them natural rivals for dividend investors. PEP edges ahead on yield at 3.37% versus KO's 2.58%. For dividend growth, PEP leads with a 5-year CAGR of 7.3% versus KO's 5.0%. KO holds the edge in dividend safety with a "Moderate" rating. KO is a Dividend Contender while PEP is a Dividend Aristocrat.
Key Metrics Comparison
| Metric | KO | PEP |
|---|
| Dividend Yield | 2.58% | 3.37% |
| Annual Dividend | $2.04 | $5.62 |
| 5-Year CAGR | 5.0% | 7.3% |
| Payout Ratio | 67% | 94% |
| Consecutive Years | 23 | 27 |
| Price | $78.74 | $166.01 |
Yield Comparison
Pepsico Inc (PEP) currently yields 3.37%, which is solid for the broader market. That's 0.79% more than Coca Cola Co (KO), which yields 2.58%. In dollar terms, PEP pays $5.62/share annually versus KO's $2.04/share.
Dividend Growth
Over the past five years, PEP has grown its dividend at a 7.3% CAGR compared to KO's 5.0%. KO: Dividend growth has been steady, with a 3-year CAGR of 5.3% and a 5-year CAGR of 5.0% (10-year: 4.3%). 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
KO's dividend safety is rated "Moderate." The payout ratio of 67% is moderate. The dividend is currently covered by earnings but leaves less room for growth. Earnings cover the dividend 1.5x. 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. KO's payout ratio of 67% 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 $258/year from KO — a difference of $79/year. At $100,000, that gap widens to $790/year.
Verdict
- Best for income: PEP
- Best for growth: PEP
- Best for safety: KO
Frequently Asked Questions
Which has a higher dividend yield, KO or PEP?
Pepsico Inc (PEP) has a higher dividend yield of 3.37% compared to Coca Cola Co (KO) at 2.58%.
Is KO or PEP a better dividend growth stock?
Pepsico Inc has the stronger dividend growth with a 5-year CAGR of 7.3%, compared to Coca Cola Co's 5.0%.
Which is safer for dividend income, KO or PEP?
Coca Cola Co's dividend safety is rated "Moderate" while Pepsico Inc is rated "At Risk." The payout ratio of 67% is moderate. The dividend is currently covered by earnings but leaves less room for growth. Earnings cover the dividend 1.5x. 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 KO vs PEP generate?
A $10,000 investment in KO generates approximately $258/year in dividends, while the same amount in PEP generates about $337/year.
Is KO or PEP a Dividend Aristocrat?
Coca Cola Co is a Dividend Contender (23 years) and Pepsico Inc is a Dividend Aristocrat (27 years).
Which has a lower payout ratio, KO or PEP?
Coca Cola Co has a lower payout ratio of 67% compared to Pepsico Inc's 94%. A lower payout ratio generally indicates more room for dividend growth and better sustainability.
KO vs PEP: which is better for retirement income?
It depends on your priorities. PEP for current income, PEP for dividend growth, KO for safety. Many retirement investors hold both for diversification.
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