Key Takeaways
- Philip Morris International raised its quarterly dividend 8.8% on Sept. 18, 2026, and PepsiCo cut its fiscal 2026 core EPS outlook on Oct. 8.
- PepsiCo yields 4.7% and grew its dividend 6.9% a year from fiscal 2020 to fiscal 2025, against a 3.1% yield and 3.5% a year for Philip Morris.
- Both dividends are covered by free cash flow, at a cash dividend payout ratio of 75% for PepsiCo and 71% for Philip Morris over their latest twelve months.
- Philip Morris’s business is growing faster, with second-quarter 2026 revenue up 10%, but it carries more debt, at 2.3x EBITDA against 1.9x for PepsiCo.
Philip Morris International (PM) raised its quarterly dividend 8.8% to $1.60 a share on Sept. 18, 2026, adding another year to a run of raises that goes back to its 2008 debut as a public company.
PepsiCo (PEP), meanwhile, cut its fiscal 2026 core EPS outlook on Oct. 8 to growth of 2.5% to 3.5%.
Yet PepsiCo still yields 4.7%, against 3.1% for Philip Morris. So if you could hold only one of them for the next 20 years, which should it be?
| Metric | PepsiCo (PEP) | Philip Morris International (PM) |
|---|---|---|
| Dividend yield | 4.7% | 3.1% |
| Annual dividend | $5.92 | $6.40 |
| Dividend growth, fiscal 2020–2025 | 6.9% a year | 3.5% a year |
| Cash dividend payout ratio (TTM) | 75% (to Sept. 16, 2026) | 71% (to June 30, 2026) |
| Net debt/EBITDA (LTM) | 1.89x | 2.34x |
| Interest coverage (EBIT/interest, LTM) | 14.9x | 10.4x |
Source: TIKR, read Oct. 9, 2026; annual dividend from StockAnalysis.
PepsiCo’s dividend caught up with its cash
PepsiCo’s third quarter of 2026, the 12 weeks to Sept. 5, showed a company running at two speeds. Every international segment grew net revenue strongly, while North America drinks lagged, and CEO Ramon Laguarta didn’t dress it up: “We’re not satisfied with the performance in the U.S.”
For a 20-year holder, the bigger question is the cash behind the dividend. Dividends paid climbed every year, from $4.23 billion in fiscal 2016 to $7.64 billion in fiscal 2025, while free cash flow went sideways over the same stretch, from $7.62 billion to $7.67 billion…
That left a risky 99.6% cash dividend payout ratio in fiscal 2025. The last twelve months look better: the ratio over the twelve months to Sept. 16, 2026 is a more comfortable 75%.
Margins are where PepsiCo is most exposed right now. Rising input costs are the reason the company now expects core EPS to grow just 2.5% to 3.5% in fiscal 2026.
Philip Morris is growing into its dividend
Philip Morris has the opposite setup: its business is growing faster than its dividend. Net revenue rose 10.4% to $11.2 billion in the second quarter of 2026 against the same quarter of 2025, and adjusted EPS rose 15.2% to $2.20. Smoke-free products like IQOS and ZYN made up about 42% of net revenue.
The cash has mostly kept up, with free cash flow rising from $6.91 billion in fiscal 2016 to $10.7 billion in fiscal 2025, while dividends paid rose from $6.38 billion to $8.62 billion…
…fiscal 2023’s 101.0% was the one stretch. The cash dividend payout ratio was 80.9% in fiscal 2025 and a well-covered 71% over the twelve months to June 30, 2026. The company has “increased its annual dividend every year since becoming a public company in 2008.” The raises were small from fiscal 2020 to fiscal 2025, though, at 3.5% a year, before September’s 8.8%.
The risk is regulation: excise tax increases and marketing restrictions can hurt or ban its products market by market. Philip Morris also carries more debt, at 2.34x EBITDA.
So which dividend wins?
If I could hold only one of these for the next 20 years, it would be PepsiCo, and room for error is the reason.
Over a stretch that long, a dividend needs cushion, and PepsiCo has more of it. Its 75% cash dividend payout ratio sits close to Philip Morris’s 71%, but it carries less debt (1.89x EBITDA against 2.34x), and its earnings cover interest 14.9x, against 10.4x for Philip Morris.
The income is where PepsiCo pulls ahead. At each company’s 5-year dividend growth rate, $10,000 in PepsiCo would pay about $19,123 over 20 years, against about $8,801 in Philip Morris. Even if PepsiCo’s raises slowed to Philip Morris’s 3.5% pace, it would still pay more every year, because it starts at $470 a year against $310.
On top of that, PepsiCo is cheap…
At 15.0x forward earnings, PepsiCo sits well below its 10-year average of 21.5x, near the 14.3x low it hit on Oct. 7.
This isn’t to say Philip Morris’s dividend isn’t safe. Its business is growing faster, smoke-free products are carrying more of it, and September’s raise extended a record that goes back to 2008. When it comes down to it, though, I’d sooner own a 4.7% yield with less debt behind it, at a price well below its own history.
Of course, PepsiCo still has to fix North America while input costs rise. Its fourth-quarter results will show whether its new cost cuts are protecting margins.
So what is PepsiCo stock actually worth?
TIKR lets you forecast the future price of any stock in less than a minute. Just enter a few assumptions into TIKR’s valuation model and see what PepsiCo could be worth. Start from Wall Street consensus estimates, or adjust the inputs to reflect your own view of the business. It’s free to use.
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!
