Dividends & Doubt: Two Stocks (Maybe)

Right. Dividends. The very word conjures images of sensible shoes, beige cardigans, and a general air of…settledness. Which, frankly, is a bit depressing. But let’s not dismiss them entirely. The idea – you give a company money, they give some back, and you can then use that to buy…more things – is, upon reflection, not entirely daft. Especially if you happen to be, shall we say, past the age where one actively seeks out excitement. It’s a bit like collecting stamps, only with slightly more paperwork. And potentially a little more return. We’re looking at two companies today – Starbucks and PepsiCo – both of which, against all odds, continue to persuade people to part with their money. Let’s see if there’s anything in it for us.

1. Starbucks

Starbucks. A place where one pays an astonishing amount for a cup of heated bean water. And yet, they persist. Truly remarkable. They’ve had a bit of a wobble lately, a bit of a “what are we doing with our lives?” crisis, but seem to be pulling themselves together. They’re paying a dividend, which, at the moment, is about $2.48 a year for every $100 you invest. Which isn’t exactly going to fund a yacht, but it’s a start. The interesting thing is, they’re pushing the limits of what they can realistically afford to pay out, given their earnings. It’s a bit like a family taking out a second mortgage to buy a slightly nicer television. Risky, but potentially rewarding. Their new CEO, Brian Niccol – a chap who previously ran Chipotle, which, let’s be honest, is a bit of a miracle in itself – seems to have a plan. He’s calling it “Back to Starbucks,” which sounds suspiciously like a desperate attempt to recapture lost glory. But it appears to be working. Sales are up, people are ordering more things, and the company is generally looking less…despondent.

The stock is up about 18% this year, which, in the grand scheme of things, isn’t bad. And the dividend yield is a respectable 2.51%. It’s not going to make you rich, but it might just prevent you from having to sell your stamp collection.

2. PepsiCo

PepsiCo. Now, here’s a company that has truly mastered the art of persuading people to consume things they don’t really need. Crisps, fizzy drinks, sugary snacks…they’ve got it all. And they’ve been doing it for a long time. They’ve been paying a dividend for 60 years, which is frankly astonishing. Sixty years! That’s longer than some countries have been independent. They’re currently paying out $5.69 a year for every $100 invested, and they’re planning to increase that to $5.92 in 2026. Which, if you do the math, is…well, it’s a bit more money. They’ve managed to increase revenue and free cash flow over the past five years, even during a pandemic and with inflation going haywire. That’s not luck; that’s good management. Or, more likely, an uncanny ability to convince people that a bag of crisps is a basic human right.

They’ve been paying out virtually all their free cash flow in dividends, which is a bit alarming. It’s like a family spending every penny they earn and then wondering where the money went. But they seem to be able to keep it up. Analysts are now expecting 6% annualized earnings growth, which should translate into more free cash flow and, presumably, more dividends. So, if you like fizzy drinks, crisps, and the idea of receiving a small amount of money every quarter, PepsiCo might be worth a look.

Overall, both companies are…okay. They’re not going to set the world on fire, but they’re not likely to collapse overnight either. In the current climate, that’s probably the best we can hope for. Just don’t expect a yacht.

2026-02-13 15:14

1. Starbucks

2. PepsiCo

Read More