PEP vs TGT: Dividend Yield, Growth & Safety Comparison
Pepsico Inc (PEP) and Target Corp (TGT) are both in the Consumer Staples sector, making them natural rivals for dividend investors. TGT edges ahead on yield at 4.01% versus PEP's 3.37%. For dividend growth, TGT leads with a 5-year CAGR of 9.4% versus PEP's 7.3%. TGT holds the edge in dividend safety with a "Safe" rating. Both are classified as Dividend Aristocrats.
Key Metrics Comparison
| Metric | PEP | TGT |
|---|
| Dividend Yield | 3.37% | 4.01% |
| Annual Dividend | $5.62 | $4.50 |
| 5-Year CAGR | 7.3% | 9.4% |
| Payout Ratio | 94% | 55% |
| Consecutive Years | 27 | 42 |
| Price | $166.01 | $115.49 |
Yield Comparison
Target Corp (TGT) currently yields 4.01%, which is attractive for the broader market. That's 0.65% more than Pepsico Inc (PEP), which yields 3.37%. In dollar terms, TGT pays $4.50/share annually versus PEP's $5.62/share.
Dividend Growth
Over the past five years, TGT has grown its dividend at a 9.4% CAGR compared to PEP's 7.3%. 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%. TGT: Dividend growth is slowing — the 3-year CAGR of 1.8% trails the 5-year rate of 9.4% and the 10-year rate of 11.1%.
Dividend Safety
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. TGT's dividend safety is rated "Safe." The payout ratio of 55% is well within sustainable levels, leaving room for future increases. Earnings cover the dividend 1.8x. TGT's payout ratio of 55% is more conservative than PEP's 94%, suggesting more room for future increases.
Income Comparison
A $10,000 investment in TGT generates approximately $401/year in dividend income, compared to $337/year from PEP — a difference of $64/year. At $100,000, that gap widens to $640/year.
Verdict
- Best for income: TGT
- Best for growth: TGT
- Best for safety: TGT
Frequently Asked Questions
Which has a higher dividend yield, PEP or TGT?
Target Corp (TGT) has a higher dividend yield of 4.01% compared to Pepsico Inc (PEP) at 3.37%.
Is PEP or TGT a better dividend growth stock?
Target Corp has the stronger dividend growth with a 5-year CAGR of 9.4%, compared to Pepsico Inc's 7.3%.
Which is safer for dividend income, PEP or TGT?
Pepsico Inc's dividend safety is rated "At Risk" while Target Corp is rated "Safe." The payout ratio of 94% is elevated, which may indicate the dividend could be cut if earnings decline. Earnings cover the dividend 1.1x. The payout ratio of 55% is well within sustainable levels, leaving room for future increases. Earnings cover the dividend 1.8x.
How much income does $10,000 in PEP vs TGT generate?
A $10,000 investment in PEP generates approximately $337/year in dividends, while the same amount in TGT generates about $401/year.
Is PEP or TGT a Dividend Aristocrat?
Pepsico Inc is a Dividend Aristocrat (27 years) and Target Corp is a Dividend Aristocrat (42 years).
Which has a lower payout ratio, PEP or TGT?
Target Corp has a lower payout ratio of 55% compared to Pepsico Inc's 94%. A lower payout ratio generally indicates more room for dividend growth and better sustainability.
PEP vs TGT: which is better for retirement income?
It depends on your priorities. TGT for current income, TGT for dividend growth, TGT for safety. Many retirement investors hold both for diversification.
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