PepsiCo Loses to 30-year U.S. Treasury Bonds on Yield. Here's Why It Wins on Everything Else.
2026-09-06 09:05
•Will Healy •The Motley Fool
••••• • Axe Cap view
Why PepsiCo’s Dividend Reigns Despite Cheaper Bonds
PepsiCo’s steady growth and dividend track record make it a strong long-term hold versus 30-year U.S. Treasuries, even with a lower yield.
Thirty-year U.S. Treasury bonds are offering a yield north of 5%, while PepsiCo’s dividend lags at around 4.1%. At first glance, the bonds win on income, but history shows PepsiCo outperforms on total returns. Over the past three decades, the stock has risen about 390%, or 920% including dividends. This isn’t a fluke—it’s a company generating nearly $10 billion in free cash flow annually, comfortably covering its dividends with room to grow payouts further. For South African investors, this isn’t a direct buy on the JSE but a useful reminder: chasing the highest yield, especially in volatile times, can be misleading. Our local dividend aristocrats like Nedbank and Sanlam share some of these income stability traits but rarely boast such global brand power or cash flow strength. If the rand weakens, the US-dollar strength behind PepsiCo could boost returns further for Rand-based investors. The risk? Rising US rates could pressure PepsiCo’s valuation and weaken appetite for dividend growers globally. this is just our opinion and not financial advice
Watch PepsiCo for exposure to steady, global consumer staples outside local markets but wait on buying directly in USD unless your rand exposure is hedged. Locally, favor resilient dividend payers like Nedbank and Sanlam, which echo some traits of stability and cash flow.
- PEP
- USD/ZAR
- Nedbank
- Sanlam
- Rising US interest rates pressuring dividend stock valuations
- Rand volatility impacting foreign investment returns
6/10
While 30-year U.S. Treasury bonds offer a higher yield of 5.25% compared to PepsiCo's 4.1% dividend yield, PepsiCo presents a more attractive long-term investment option. The company has demonstrated 390% stock appreciation over 30 years (920% including dividends), maintains a 54-year streak of dividend increases making it a Dividend King, and generates $9.7 billion in free cash flow—well above its $7.8 billion dividend payout. These factors suggest PepsiCo offers better long-term returns despite lower current income.
Our take is based on reporting first published by The Motley Fool.