I like dividend stocks. I'm not talking about stocks that happen to pay a dividend, since oftentimes that's a nice bonus, but it's not the main reason you'd hold it. Rather, I mean stocks with a fairly stable share price you hold for the express purpose of collecting dividend checks.
They are the ultimate set it-and-forget it investment that you can hold forever with little to no stress and very low risk. That's especially true if the company has a long history of increasing its dividend annually.
Investors can buy some shares, set up a dividend reinvestment plan (DRIP), and let your return compound for as long as you like.
And PepsiCo (PEP +2.00%) is one of the best dividend stocks to add to your portfolio right now and hold through the end of the decade, at the very least.
NASDAQ: PEP
Key Data Points
I will take a Pepsi, actually
"Is Pepsi OK?" is probably a sentence servers in restaurants across the country are sick of asking.
Image source: Getty Images.
Indeed, Pepsi's eternal rival Coca-Cola (KO +1.33%) has become synonymous with soda in much of the United States and the world.
But regardless of your preference in soft drinks, Pepsi is the better pick for your income portfolio, and it's not just because its 3.85% yield is significantly better than Coca-Cola's 2.84%.
Both Coca-Cola and Pepsi are dividend stocks through and through. Neither company is growing quickly; they're both well into their maturity as companies. But Pepsi's dividend is much stronger than its rival's.
First there's the yield, which I mentioned already. But even though Coca-Cola has the longer dividend increase streak at 63 years to Pepsi's 53, Pepsi is growing its dividend at a much faster rate. And both are Dividend Kings, or companies that have increased their dividends for 50 years or more.
Pepsi has grown its dividend at a compound annual growth rate (CAGR) of 7.51% over the past three years to Coca-Cola's CAGR of 5.04%. Over the past 5 years Pepsi wins with a CAGR of 6.93% to Coca-Cola's 4.46%.
In addition, Pepsi has superior operating cash flow of $5.4 billion to Coca-Cola's $2.4 billion for the first nine months of 2025. For the first nine months of 2025 Pepsi paid out $5.6 billion in dividends and Coca-Cola paid out $4.3 billion.
Now, while both companies are paying more in dividends than they generate in operating cash flow, Pepsi is only paying $200 million over while Coca cola is paying $1.9 billion more in dividends than it generates in operating cash flow. That makes Pepsi the safer prospect but Pepsi can't afford to keep doing this for too long. It's a risk shared by both stocks but the risk to Pepsi is much lower than to its rival.
Neither company is growing quickly, Pepsi's revenues were up 1% over the first nine months of 2025 and Coca-Cola's revenue was up 2%. And both companies have more or less the same debt with Pepsi at $44 billion and Coca-Cola at $43 billion. Pepsi is slightly cheaper to own with a price to earnings (P/E) ratio of 22 to Coca-Cola's 25. However, Pepsi seems to have a better time drumming up the cash it needs to pay its dividends while Coca-Cola, despite its faster revenue growth isn't far from paying twice in dividends what it generates in operating cash flow.
Put simply, Coca-Cola is deep in the hole in its efforts to pay its dividends and Pepsi is not. Also consider the fact that Pepsi's cash for 2025 will be a little skewed as it paid $1.65 billion (net) for Poppi in May, 2025 so its cash flow might not be as bad as it seems relative to its dividend payments. Combine that with Pepsi's higher yield and dividend growth rate, and Pepsi seems to be the stronger pick for a long-term dividend play. So despite my love of Mexican Coke, Pepsi is the one I would add to my dividend portfolio.
