MCD vs PEP: Dividend Yield, Growth & Safety Comparison
Mcdonalds Corp (MCD) from Consumer Discretionary and Pepsico Inc (PEP) from Consumer Staples offer different dividend profiles for income-focused portfolios. PEP offers a significantly higher 3.37% yield compared to MCD's 2.17%, a gap of 1.20%. Both stocks show similar dividend growth rates, each around 8.1% over the past five years. MCD holds the edge in dividend safety with a "Moderate" rating. MCD is a Dividend King while PEP is a Dividend Aristocrat.
Key Metrics Comparison
| Metric | MCD | PEP |
|---|
| Dividend Yield | 2.17% | 3.37% |
| Annual Dividend | $7.08 | $5.62 |
| 5-Year CAGR | 8.1% | 7.3% |
| Payout Ratio | 60% | 94% |
| Consecutive Years | 50 | 27 |
| Price | $327.89 | $166.01 |
Yield Comparison
Pepsico Inc (PEP) currently yields 3.37%, which is solid for the broader market. That's 1.20% more than Mcdonalds Corp (MCD), which yields 2.17%. In dollar terms, PEP pays $5.62/share annually versus MCD's $7.08/share.
Dividend Growth
Over the past five years, MCD has grown its dividend at a 8.1% CAGR compared to PEP's 7.3%. MCD: Dividend growth is slowing — the 3-year CAGR of 7.3% trails the 5-year rate of 8.1% and the 10-year rate of 7.9%. 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
MCD's dividend safety is rated "Moderate." The payout ratio of 60% is moderate. The dividend is currently covered by earnings but leaves less room for growth. Earnings cover the dividend 1.7x. 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. MCD's payout ratio of 60% 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 $217/year from MCD — a difference of $120/year. At $100,000, that gap widens to $1200/year.
Verdict
- Best for income: PEP
- Best for growth: MCD
- Best for safety: MCD
Frequently Asked Questions
Which has a higher dividend yield, MCD or PEP?
Pepsico Inc (PEP) has a higher dividend yield of 3.37% compared to Mcdonalds Corp (MCD) at 2.17%.
Is MCD or PEP a better dividend growth stock?
Mcdonalds Corp has the stronger dividend growth with a 5-year CAGR of 8.1%, compared to Pepsico Inc's 7.3%.
Which is safer for dividend income, MCD or PEP?
Mcdonalds Corp's dividend safety is rated "Moderate" while Pepsico Inc is rated "At Risk." The payout ratio of 60% is moderate. The dividend is currently covered by earnings but leaves less room for growth. Earnings cover the dividend 1.7x. 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 MCD vs PEP generate?
A $10,000 investment in MCD generates approximately $217/year in dividends, while the same amount in PEP generates about $337/year.
Is MCD or PEP a Dividend Aristocrat?
Mcdonalds Corp is a Dividend King (50 years) and Pepsico Inc is a Dividend Aristocrat (27 years).
Which has a lower payout ratio, MCD or PEP?
Mcdonalds Corp has a lower payout ratio of 60% compared to Pepsico Inc's 94%. A lower payout ratio generally indicates more room for dividend growth and better sustainability.
MCD vs PEP: which is better for retirement income?
It depends on your priorities. PEP for current income, MCD for dividend growth, MCD for safety. Many retirement investors hold both for diversification.
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