Key Points
-
Recent troubles notwithstanding, PepsiCo remains well positioned to maintain its status as one of the Dividend Kings, or stocks with over 50 years of consecutive dividend growth.
-
Pfizer’s cost cutting and pipeline expansion efforts stand to counter COVID and patent cliff-related headwinds, boding well for the stock and its nearly 6% forward dividend yield.
-
AT&T may have halved its dividend four years ago, but don’t assume that means “Ma Bell” will need to cut its payouts once again.
-
The S&P 500 (SNPINDEX: ^GSPC) currently yields around 1.1%, but there are plenty of blue chip dividend stocks with far larger payouts. However, it’s challenging to figure out which of these high-yield dividend stocks will likely sustain an above-average payout and which ones are at risk of becoming yield traps.
However, based on payout ratios and dividend-growth track records, these three stocks stand out: PepsiCo (NASDAQ: PEP), Pfizer (NYSE: PFE), and AT&T (NYSE: T).
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
PepsiCo has what it takes to stay a Dividend King
PepsiCo’s 54-year track record of consecutive dividend growth makes it one of the Dividend Kings. The food and beverage giant may still be contending with weak domestic sales, while its payout ratio sits at the higher-risk range among consumer staples stocks, at 69%.
However, don’t assume a dividend cut is just around the corner. Even as management has walked back guidance, the company still anticipates positive earnings growth of around 2.5% to 3.5% this year, driven by stronger international growth.
Dividend growth could remain relatively low for a while, but as management executes a turnaround focused mainly on cost reduction, PepsiCo could exit this slump sooner than expected. With the stock trading at a discounted 16 times forward earnings, this could spark a big recovery for shares, providing upside potential alongside the stock’s 4.2% forward dividend yield.
Pfizer’s nearly 6% yield remains well covered
Pfizer has raised its dividend for 16 consecutive years. At current prices, Pfizer yields 5.8%, a yield that may raise worries about potential cuts down the road, especially as the pharmaceutical company’s revenue and earnings remain below COVID-era highs.
But while Pfizer’s COVID products are on the decline, and the company faces the loss of patent exclusivity for blockbuster drugs like Eliquis and Ibrance, efforts like cost cutting and acquisition of new drug candidates suggest Pfizer can mitigate earnings declines in the near term, keeping the $1.72 per share in annual dividends well covered.
Forecasts call for earnings per share (EPS) of $3.04 and $2.94, respectively, during 2026 and 2027. This suggests a payout ratio of around 56.5% to 58.5%, still within an acceptable range for defensive names like pharmaceutical stocks.
For AT&T, past cuts don’t necessarily mean more pruning ahead
AT&T’s last dividend cut came on the heels of a one-time event, the spin-off of its WarnerMedia unit in 2022. Although “Ma Bell” hasn’t raised its 27.75-cent-per-share quarterly dividend since halving it four years ago, shifting its focus toward debt reduction, I still wouldn’t anticipate another cut around the corner.
For one, the telecommunications company’s forward payout ratio is just under 47%, which is very sustainable for a defensive stock. Even as sales growth remains sluggish, with AT&T putting billions more to work to reduce debt and buy back shares, analysts anticipate EPS will rise 8.3% next year, from $2.40 to $2.60.
Telecom stocks have tumbled recently on fears of future competition from Space Exploration Technologies Corp’s Starlink unit. However, if the outcome of this proves better than feared and AT&T successfully maintains slow-but-steady earnings growth, the dividend could be in for an increase. Trading for less than 9 times forward earnings, shares could benefit from multiple expansion as well.
Should you buy stock in PepsiCo right now?
Before you buy stock in PepsiCo, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and PepsiCo wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $344,878!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,097,846!*
Now, it’s worth noting Stock Advisor’s total average return is 852% — a market-crushing outperformance compared to 208% for the S&P 500. Don’t miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of November 10, 2026.
Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer and Space Exploration Technologies. The Motley Fool has a disclosure policy.
