Key Takeaways
- UPS yields 7.1% and PepsiCo yields 4.8%. UPS’s dividend grew 10.2% a year from fiscal 2020 to fiscal 2025, and PepsiCo’s grew 6.9% a year.
- Both dividends are stretched: UPS paid out 99% of its free cash flow over the trailing 12 months, and PepsiCo paid out 84%.
- UPS’s dividend is $6.56 a share a year, the same as in fiscal 2025, while PepsiCo’s rose to $5.92 from $5.62 in fiscal 2025.
- The number to watch is UPS’s free cash flow against the roughly $5.4 billion in dividends it plans to pay in 2026.
A 7.1% yield from a blue chip makes any income investor look twice. That’s what United Parcel Service (UPS) pays at $92.28 a share. On its July earnings call, UPS said it still plans to pay about $5.4 billion in dividends in 2026, subject to board approval.
PepsiCo (PEP) pays a smaller 4.8%. Its dividend grew 6.9% a year from fiscal 2020 to fiscal 2025, slower than UPS’s 10.2% over the same stretch.
Both payouts now eat up most of the free cash flow behind them, though. So which one actually pays you more over the next 10 years?
| Metric | UPS | PepsiCo |
|---|---|---|
| Dividend yield | 7.1% | 4.8% |
| Annual dividend | $6.56 | $5.92 |
| Dividend growth, fiscal 2020–2025 | 10.2% a year | 6.9% a year |
| Cash dividend payout ratio (TTM) | 99% | 84% |
| Net debt/EBITDA | 1.6x | 2.1x |
| Interest coverage | 7.6x | 13.1x |
| Forward P/E | 12.0x | 14.5x |
UPS: a big check with a thin cushion
In the second quarter of 2026, UPS completed its planned cutback of Amazon volume and the network overhaul that came with it. Second-quarter revenue rose 7.6% to $22.8 billion from $21.2 billion a year earlier, and adjusted operating profit rose 12% to $2.1 billion.
The dividend is where it gets tight. Over the twelve months to June 30, 2026, UPS paid $5.41 billion in dividends out of $5.46 billion of free cash flow, a risky 99% cash dividend payout ratio. Free cash flow peaked at $10.8 billion in fiscal 2021. By fiscal 2025 it had fallen to $4.77 billion, below the $5.40 billion UPS paid out that year.
The first half of 2026 looks better, with $1.57 billion of free cash flow against $742 million a year earlier. But with the dividend held at $6.56 a share, the same as in fiscal 2025, another slip in free cash flow leaves no room to fund it.
PepsiCo: steadier cash, smaller check
UPS’s cash flow has swung from year to year. PepsiCo’s has hardly changed, and that’s both its strength and its problem.
The business is still growing, slowly: net revenue rose 6.4% in the second quarter of 2026, and core EPS rose 4%. The soft spot is North American snacks, where revenue fell on lower effective pricing.
Over the twelve months to June 13, 2026, PepsiCo paid $7.81 billion in dividends out of $9.28 billion of free cash flow, a cash dividend payout ratio of 84%: covered, but tighter than you’d like. The longer record is tighter still. Free cash flow was $7.62 billion in fiscal 2016 and $7.67 billion in fiscal 2025, while dividends paid climbed every year, from $4.23 billion to $7.64 billion.
That pushed the ratio to 100.6% in fiscal 2024 and 99.6% in fiscal 2025. A dividend can’t grow faster than the cash behind it forever.
So which dividend wins?
UPS pays you more over the next 10 years, by a wide margin. At today’s yields and each company’s growth rate from fiscal 2020 to fiscal 2025, $10,000 in UPS pays about $11,414 in dividends over the decade, against about $6,610 in PepsiCo.
Of course, UPS won’t keep raising 10.2% a year from a 99% payout.
Here’s the thing, though: UPS doesn’t need another raise to win. Hold its dividend flat, and $10,000 pays $710 a year, or $7,100 over 10 years, still more than PepsiCo’s $6,610. And PepsiCo only gets there if it keeps raising 6.9% a year from a payout that ran near 100% in fiscal 2024 and 2025.
This isn’t to say PepsiCo’s dividend is in trouble. Its cash flow is far steadier, and its 84% payout leaves more room than UPS’s 99%. It’s just that a 7.1% yield gives UPS a head start that PepsiCo’s raises can’t close in a decade.
The one thing that would flip the answer is a dividend cut at UPS. In its next couple of reports, watch its free cash flow against the $5.4 billion in dividends it plans for 2026.
So what is UPS stock actually worth?
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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!
