MCD vs PEP: Dividend Comparison
Dividend data as of
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.
Verdict
Yield Analysis
PEP yields 1.20% more than MCD. In dollar terms, MCD pays $7.08/share vs PEP's $5.62/share annually.
Dividend Growth
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: 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: 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 MCD vs PEP today?
At $327.89 per share, $10,000 buys about 30.5 shares of Mcdonalds Corp (MCD). Each share pays $7.08 per year in dividends, so the position starts out generating roughly $216 per year — about $18 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.
PEP is the larger income stream from day one: $123 per year more on the same $10,000 invested.
What could $10,000 of MCD or PEP income look like in 10 years?
Mcdonalds Corp (MCD) has raised its dividend about 8.1% a year over the past five years. If that pace held, the $217 per year that $10,000 generates today at the current 2.17% yield would reach $473 per year by 2036 — a 4.7% 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, PEP pays more in 2036: $679 versus $473 per year. The projection assumes each five-year growth rate persists and no dividends are reinvested — real payouts will differ.
When would MCD's dividend growth overtake PEP's higher yield?
Not within a realistic holding period. Mcdonalds Corp (MCD) is growing its dividend faster (8.1% vs 7.3% a year), but the starting-yield gap — 3.37% for PEP vs 2.17% for MCD — is wide enough that the crossover sits more than 30 years out on trailing rates. For income you plan to spend, PEP's head start is decisive.
Can MCD and PEP afford their dividends?
Mcdonalds Corp (MCD) earns $11.72 per share against $7.08 paid out in dividends — 1.7x coverage (a 60% payout ratio).
Pepsico Inc (PEP) earns $5.99 per share against $5.62 paid out in dividends — 1.1x coverage (a 94% payout ratio).
MCD'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 PEP if earnings weaken.
Which fits an early-retirement income portfolio better, MCD or PEP?
For income you need right now, Pepsico Inc (PEP) leads: $100,000 invested today pays about $281 a month at the current 3.37% yield, versus $181 a month from Mcdonalds Corp (MCD) at 2.17%.
With a decade or more before the income is needed, MCD's faster dividend growth (8.1% vs 7.3% a year) matters more than the starting yield — raises compound into the larger paycheck over time.
On consistency: MCD has raised its dividend 50 consecutive years; 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 $587/yr in MCD 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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