Coke vs Pepsi: Which Dividend Is Actually Safer?

By Trey Thoelcke Published Mar 10, 9:25AM EDT

Quick Read

Coca-Cola (KO) has 64 years of increases, 2.6% yield, and 72% forward FCF payout ratio. PepsiCo (PEP) has 54 years, 3.5% yield, and 98% FCF payout with $7.67B FCF barely covering $7.64B in dividends.
Coca-Cola’s improving FCF guidance rebuilds dividend coverage after distorted 2025 results, while PepsiCo’s near-zero FCF margin leaves no buffer for further earnings or volume pressure.

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Coke vs Pepsi: Which Dividend Is Actually Safer? — © celsopupo / Getty Images

Coca-Cola (NYSE: KO | KO Price Prediction) and PepsiCo (NASDAQ: PEP) are both Dividend Kings, but “reliable” is not the same as “equally safe.” Here is what the numbers show.

Coca-Cola: 64 Years of Increases, but Cash Flow Tells a Complicated Story

Coca-Cola sells beverages in nearly every country, generating $47.9 billion in FY2025 revenue from brands like Coca-Cola Zero Sugar, Sprite, fairlife, and Powerade. The dividend streak stands at 64 consecutive annual increases. The current quarterly payment is $0.53 per share, with the ex-dividend date set for March 13, 2026.

Metric	Value
Annual Dividend	$2.06 per share
Dividend Yield	2.6%
Consecutive Increases	64 years
Dividend King	Yes
FY2025 EPS	$3.04
Earnings Payout Ratio	67%

The 67% earnings payout ratio looks healthy, but cash flow is more complicated. Coca-Cola paid $8.8 billion in dividends in FY2025 against $7.4 billion in operating cash flow and $5.3 billion in reported free cash flow. The reported FCF was depressed by a one-time fairlife contingent consideration payment. Management guided FY2026 free cash flow of approximately $12.2 billion, putting the forward FCF payout ratio at roughly 72%—manageable, and the 2025 figures are distorted. The balance sheet carries $10.3 billion in cash and $32.2 billion in shareholders’ equity against $70.5 billion in total liabilities.

CEO James Quincey said on the Q4 2025 earnings call: “I’m encouraged by our performance in 2025 which showed both the resilience and momentum that define our business.” The 2026 guidance for 7% to 8% comparable EPS growth off a $3.00 base suggests the dividend cushion will rebuild this year.

Multiple executives sold Coca-Cola shares in late February and early March 2026 at prices between $77 and $80.75, though concurrent equity grants suggest routine tax-driven rebalancing rather than a loss of confidence.

PepsiCo: A Bigger Business, but the Dividend Math Is Tighter

PepsiCo combines beverages with Frito-Lay snacks and Quaker foods. FY2025 revenue came in at $93.9 billion, but it was a difficult year: operating income fell 19.6% and net income dropped 14%, driven by a $1.993 billion Rockstar brand impairment and restructuring charges.

Metric	Value
Annual Dividend	$5.92 per share (effective June 2026)
Dividend Yield	3.5%
Consecutive Increases	54 years
Dividend King	Yes
FY2025 EPS	$8.14
Earnings Payout Ratio	69%
FCF Payout Ratio	~98%

The FCF picture is the key concern. PepsiCo generated $7.67 billion in free cash flow in FY2025 against $7.64 billion in dividends paid—essentially a 1.0x coverage ratio with no margin for error. In 2024, FCF of $7.19 billion fell just short of the $7.23 billion dividend payout. The earnings payout ratio rose to 95% in 2025. Leverage is higher than Coca-Cola’s: $86.9 billion in total liabilities against $20.4 billion in shareholders’ equity, with the company holding $9.2 billion in cash as a near-term buffer.

CEO Ramon Laguarta announced the latest increase on the Q4 2025 call: “We are pleased to announce a 4 percent increase in our annualized dividend per share beginning with the June 2026 payment, representing our 54th consecutive annual increase.” Management also authorized a $10 billion share repurchase program through February 2030, though actual 2025 buybacks were a modest $1.0 billion.

The Verdict: Coke Has the Safer Dividend Today

Coke Dividend Safety Rating: Safe

Pepsi Dividend Safety Rating: Moderate Risk

Coca-Cola’s 2026 guided FCF of $12.2 billion puts the dividend on firmer footing after a distorted 2025. The 64-year streak, lower leverage, and accelerating EPS guidance make its dividend streak appear more structurally supported. PepsiCo’s near-100% FCF payout ratio, rising earnings payout ratio, and a year of earnings pressure leave little room for error. The 3.5% yield is attractive, but yield alone is not a safety argument. If commodity costs from tariffs accelerate or North America volume declines deepen, Pepsi’s FCF coverage could fall further below 1.0x.

About the Author Trey Thoelcke →

Trey has been an editor and author at 24/7 Wall St. for more than a decade, where he has published thousands of articles analyzing corporate earnings, dividend stocks, short interest, insider buying, private equity, and market trends. His comprehensive coverage spans the full spectrum of financial markets, from blue-chip stalwarts to emerging growth companies.

Beyond 24/7 Wall St., Trey has created and edited financial content for Benzinga and AOL's BloggingStocks, contributing additional hundreds of articles to the investment community. He previously oversaw the 24/7 Climate Insights site, managing editorial operations and content strategy, and currently oversees and creates content for My Investing News.

Trey's editorial expertise extends across multiple publishing environments. He served as production editor at Dearborn Financial Publishing and development editor at Kaplan, where he helped shape financial education materials. Earlier in his career, he worked as a writer-producer at SVE. His freelance editing portfolio includes work for prestigious clients such as Sage Publications, Rand McNally, the Institute for Supply Management, the American Library Association, Eggplant Literary Productions, and Spiegel.

Outside of financial journalism, Trey writes fiction and has been an active member of the writing community for years, overseeing a long-running critique group and moderating workshop sessions at regional conventions. He lives with his family in an old house in the Midwest.