Happy Monday,

It's Zach here with another weekly investing update for you!

PepsiCo hit a 52-week low near $133 at filming, and the forward yield hit 4.43%. The stock got cheaper on Friday after another 3% drop. That is the highest yield on PepsiCo since 2007, and after I ran the math, the highest since 1984. Forty-two years. I'm personally not buying PepsiCo right now, but I see the case for it, especially if you're near retirement and want reliable dividend income.

This Dividend Stock Just Hit Its Highest Yield in 42 Years

The Key Story

PepsiCo's Highest Yield in 42 Years

📊 Research PEP: DividendData.com/stocks/pep

▶️ Watch the full analysis on YouTube: This Dividend Stock Just Hit Its Highest Yield in 42 Years

PepsiCo ($PEP) is one of the most reliable dividend growers in the market, with decades of consecutive raises, a beverage and snacks portfolio that only really rivals Coca-Cola ($KO), and decades as a cash-flow compounder. On yield alone, it just got historically cheap.

52-week low: Near $133 at filming (about $129.75 as of Sep 20, 2026). Down about 2% on the week of filming, about 5% over the past year, and about 13% over five years.
Forward yield: 4.43% on a $5.92 forward annual dividend at filming. TTM: $5.81 paid, 4.34% TTM yield at filming. As of Sep 20, 2026 the forward yield is about 4.47% on the same $5.92.
Yield vs history: Highest since 2007 in the data, and the highest in 42 years by my math (back to 1984). For most of the past decade this stock often sat in the 2% range, so mid-4% is a real stretch from the recent norm. [Zach: you said 5-year median yield 3.03%; Terminal Value Graph 5Y median is 2.95%. Keep 3.03%, use 2.95%, or leave the median out?]
Dividend growth: Up 96.68% over ten years (7% CAGR). Three-year growth has slowed to about 17% (5.37% CAGR). The most recent raise was only 4.04%.

Dividend Safety

Is a 99% FCF Payout a Yield Trap?

The red flags: a 92% earnings payout and a 99% free cash flow payout on last year's numbers. In the 1980s that payout was closer to 30%. That gap is the debate.

By design, and still high: PepsiCo is a mature cash-flow business that pays out most of what it earns. Fiscal 2025 FCF payout was about 99.6%. Net income payout was about 92.7%, and it has not printed above 100% on GAAP earnings in the past ten years.
Trend is better: TTM free cash flow is about $9.28B against about $7.81B in dividends paid. That is trending toward an ~84% FCF payout, not worse. CapEx is down, and the first two quarters of fiscal 2026 were stronger than 2025.
Cut risk: I would not say PepsiCo is at risk of a dividend cut. They just raised about 4% two quarters ago. Earnings, operating cash flow, and free cash flow are improving. Dividend.com has the safety score at a B.

If you optimize yield on cost, this is one of the better PEP entry yields in modern history. That is not the same thing as me buying it.

Valuation

Cheap Vs History, Still a Slow Grower

PepsiCo is not a high-growth company. Low-single-digit earnings growth is what Wall Street is modeling. When you own a slow grower, the entry price has to do real work.

Multiples at filming: Forward P/E about 15.63 on $8.55 forward EPS. Trailing P/E about 17.52. That forward multiple was the lowest of the past five years (median about 21.3) and the lowest of the past ten (median about 22.07).
Growth: Ten-year EPS up about 77% (6.07% CAGR). Three-year adjusted EPS up only about 11% (3.98% CAGR). Analysts are modeling low-single-digit EPS growth through 2030. Buy today and you are paying about 13x 2030 earnings on that path.
Fair-value framing: Against PepsiCo's own 10-year median multiples, the stock screens at a wide discount to its history. Conservative DCF and dividend-discount work from the video lands closer to fair value, or even some downside, depending on your assumptions.
No disruption story: Beverages and snacks. I do not see an AI risk here. It should throw off cash for decades. You just cannot pay a premium for it.

Next earnings date to mark: October 8.

My Plan

Verdict: I'm Not Buying PEP Right Now

My Plan: NOT BUYING for my own portfolio at these levels.

I see why members in our community were buying this week. On yield, this is historically attractive for a long-running dividend grower. If you are near retirement and want reliable dividend income, or you have been waiting for a better yield on cost, PepsiCo makes more sense now than it did a few years ago.

I am still sitting this one out. High payout, slowing dividend growth, and low-single-digit earnings growth mean the valuation has to stay disciplined. I’m focused more on total return and am targeting higher growth businesses.

See where PEP's yield sits against its own history in the Yield Analyzer.

Dividend News

New Dividend Increases This Week

Get all Dividend Raises, Cuts, and Declarations: https://www.dividenddata.com/news

MSFT - Microsoft raises dividend by 8% to $0.98/share
PM - Philip Morris raises quarterly dividend by 8.8% to $1.60/share
JPM - JPMorgan Chase raises dividend to $1.65/share
MCD - McDonald's raises dividend by 3.76% to $1.93/share
TXN - Texas Instruments raises quarterly dividend by 7% to $1.52/share
WPC - W. P. Carey raises dividend by 1.1% to $0.95/share
FAF - First American Financial raises dividend to $0.61/share
NFG - National Fuel Gas raises dividend by 3.7% to $0.555/share
INGR - Ingredion raises dividend by 1% to $0.83/share

This Dividend Stock Just Hit Its Highest Yield in 42 Years