Key Takeaways
- Realty Income yields 5.6% and pays monthly. PepsiCo yields 4.3%, but it raised its dividend 6.9% a year from fiscal 2020 to fiscal 2025, against 2.9% for Realty Income.
- Realty Income’s AFFO payout ratio fell from 83% in fiscal 2016 to 75% in fiscal 2025, and the company raised its 2026 AFFO guidance on Nov. 2.
- PepsiCo’s dividends took 75% of its free cash flow over the twelve months to Sept. 16, 2026, after taking 101% and 100% of it in fiscal 2024 and 2025.
- At their 5-year rates, PepsiCo’s dividend income on $10,000 would pass Realty Income’s around 2033.
Realty Income (O) raised its 2026 AFFO guidance on Nov. 2, and its 5.6% yield arrives every month.
A month earlier, PepsiCo (PEP) went the other way. It cut its 2026 core EPS growth outlook to 2.5%-3.5%, from the low end of 5%-7%. Its 4.3% yield is smaller, but its dividend has grown more than twice as fast as Realty Income’s over the last five years.
Retirees seeking income want a check they can count on, and ideally one that keeps growing. So which is the better dividend stock for retirees?
| Metric | Realty Income (O) | PepsiCo (PEP) |
|---|---|---|
| Dividend yield | 5.6% | 4.3% |
| Annual dividend | $3.26 a share, paid monthly | $5.92 a share, paid quarterly |
| Dividend growth, fiscal 2020-2025 | 2.9% a year | 6.9% a year |
| Coverage, last reported | AFFO payout ratio: 75% (fiscal 2025) | Cash dividend payout ratio: 75% (TTM to Sept. 16, 2026) |
| Net debt/EBITDA (LTM) | 5.8x | 2.0x |
| Interest coverage (LTM) | 2.4x | 14.9x |
Source: TIKR and StockAnalysis, as of Nov. 9, 2026.
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Realty Income: 32 years of raises, and room to spare
Realty Income now expects $4.45-$4.46 of AFFO a share for 2026, up from $4.44-$4.45. In the third quarter, AFFO rose 3.7% to $1.12 a share from the same quarter of 2025. The company invested $2.6 billion in the quarter, and its biggest area was industrial properties, at $1.15 billion. Occupancy stood at 98.8% on Sept. 30.
It’s widening how it pays for that growth, too. In the third quarter, KKR put about €528.0 million into a new joint venture for a 49% stake in 54 of Realty Income’s European properties. “We have deliberately expanded our sources of capital and global investment capabilities, positioning us to prudently allocate capital,” CEO Sumit Roy said.
The company says it has raised its dividend “for over 32 consecutive years.” In September, it announced its 116th consecutive quarterly increase. Over the last decade, AFFO per share grew from $2.88 in fiscal 2016 to $4.28 in fiscal 2025. Over the same years, the dividend grew from $2.39 to $3.22:
That brought its AFFO payout ratio down from 83.0% to a well-covered 75.2%.
Debt is the weak spot. Interest coverage is a thin 2.4x, and management flags about $2.9 billion of debt due in 2027 at a sub-3% rate, at a time when rates are higher.
PepsiCo’s raises have outrun its cash
Realty Income’s dividend has room under it. PepsiCo’s has been taking almost all of its free cash flow. Free cash flow was $7.62 billion in fiscal 2016 and $7.67 billion in fiscal 2025. Over the same years, dividends paid rose from $4.23 billion to $7.64 billion:
That’s a risky 100.6% cash dividend payout ratio in fiscal 2024 and 99.6% in fiscal 2025. The last twelve months look better, at 75%. Operating cash flow rose to $7.95 billion in the first 36 weeks of fiscal 2026, from $5.47 billion a year earlier. PepsiCo plans to pay $7.9 billion of dividends this year.
Abroad, the business is doing well. Every international segment grew net revenue in the third quarter, when total net revenue rose 5.6%. But core EPS rose just 2%, to $2.34, and rising input costs shrank its core operating margin. On the third-quarter call, CEO Ramon Laguarta said of North America that “we’re not satisfied with the performance in the U.S.”
Then on Oct. 15, KFC said it will switch about 3,700 US restaurants from PepsiCo’s drinks to Coca-Cola’s starting in January 2027. A week later, PepsiCo renewed its US deal with Taco Bell through 2036.
So which dividend wins?
For retirees, I’d go with Realty Income. It pays the bigger check today, and it pays it every month. Its AFFO payout ratio has drifted down for a decade, while PepsiCo’s dividends have caught up with its free cash flow.
PepsiCo’s best argument is its faster raises. At its 5-year rate, $10,000 in PepsiCo pays $430 a year now and about $786 in year 10, a 7.9% yield on your cash. The same $10,000 in Realty Income pays $560 now and about $725 in year 10, a 7.2% yield. At those rates, PepsiCo’s income passes Realty Income’s around 2033. But keeping up 6.9% raises takes free cash flow that grows, and PepsiCo’s barely moved from fiscal 2016 to fiscal 2025.
This isn’t to say PepsiCo’s dividend is in trouble. Its balance sheet is far stronger, its international business is growing, and its last twelve months of coverage were the best since before fiscal 2021. It’s just that a retiree living off the check should want the one with a decade of room under it.
Of course, PepsiCo says it’s finding more structural cost cuts to fund growth. If those get North America back on track, its faster raises could win out over a longer stretch.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
