PepsiCo's dividend yield trails the 30-year U.S. Treasury bond, but its 54-year streak of payout increases and decades of stock appreciation make the case for owning the stock instead. The company's free cash flow comfortably covers its dividend, leaving room for further hikes.
Rising rates have made bonds harder for dividend stocks to beat, and PepsiCo is no exception. The 30-year Treasury bond now yields around 5.25%, a level few dividend stocks match. Meanwhile, PepsiCo's own yield sits near 4.1%, yet the stock offers advantages a Treasury bond cannot.
Brands and long-term returns anchor the case
A 30-year Treasury bond can lose value if rates keep rising, forcing holders to sell at a discount to raise their effective return. PepsiCo shares carry their own risk, but the company's portfolio spans Mountain Dew, Gatorade, Doritos, and Quaker Oats — brands built over decades that support future growth.
That appreciation has been substantial. Over the past three decades, PepsiCo stock climbed almost 390%. That figure rises past 920% once dividends are included.
A dividend built on 54 years of increases
The dividend itself carries weight beyond its current yield. In May, PepsiCo raised its annual payout to $5.92 per share, extending a streak of increases that now spans 54 straight years and earns the company Dividend King status. That track record ties the stock's reputation to annual payout hikes, and since ending the streak would likely undermine confidence in the stock, PepsiCo is likely to keep raising the payout if it can.
Affording it looks manageable for now. Over the trailing twelve months, PepsiCo generated $9.7 billion in free cash flow. That is well above the $7.8 billion it paid out in dividends over the same period.
Treasuries still offer a guaranteed yield with default risk considered highly unlikely. But between the brand portfolio, the payout history, and the potential for further stock gains, PepsiCo looks like the more suitable choice for most investors weighing the two.
Source: The Motley Fool
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