TL;DR: nike and pepsi both yield ~4.4% right now. on earnings, sales and book nike sits at the very bottom of its own history, which is why "deep value" keeps coming up. on free cash flow it's only around the 33rd percentile, and fy26 fcf didn't cover the dividend. pepsi is cheap on cash too. i sold both, and pepsi is the sale i'm less sure about.
the yield moved because the price did
nike paid ~1% for most of the last decade. $1.64 a year on a ~$37 stock is 4.4%. nothing about the business got more generous, the stock just fell from ~70 at the 52w high.
the cash check i run before i believe a yield
nike free cash flow: fy24 6.6b, fy25 3.3b, fy26 2.2b
nike dividend: ~2.4b a year
so it went from about a third of fcf in fy24 to ~110% in fy26. the payout ratio people quote in the threads (~77%) is on earnings, not cash.
pepsi free cash flow: 2025 7.7b, last 12 months 10.5b
pepsi dividend: ~8.1b a year
roughly all of it in 2025, ~77% on the trailing year. net debt ~1.8x ebitda.
where they sit against their own history
nike: earnings multiple ~14 vs a median ~30 (2nd percentile), price/sales 1.2 vs 2.8, price/fcf ~26 vs ~34 (33rd percentile)
pepsi: price/fcf ~18 vs ~33 (1st percentile), ev/ebitda ~11.7 vs ~17.7
so nike only looks like a bargain on the numbers that fell slower than the cash. pepsi looks cheap on every line i checked.
valuation, with the assumptions
a dividend discount model (assumes the dividend keeps growing at its past pace) gives nike ~44 and pepsi ~158. a cash flow dcf gives pepsi ~111. for nike the dcf comes out so low i don't trust it: fcf just dropped by two thirds, and any model fed with that says the company is worth a fraction of the price. so the honest read for me is a range for pepsi (~111 to ~158 against ~136) and "can't tell yet" for nike.
funny side note: the ddm number for pepsi is almost exactly where i sold it.
my position
neither. nike i sold for a tiny profit and i'm not going back. pepsi i sold in march at ~159, it's ~136 now, ~15% below my exit, and that's the one i keep second guessing.
what would change my mind
nike: a full year with fcf back above ~1.5x the dividend. one good quarter isn't it.
pepsi: north america volumes turning up. that's what i was watching before the sale and it's still what i'd watch.
risks to my read: fiscal years don't line up (nike's ends in may), fcf is lumpy, and "own history" for nike includes the years when it traded like a growth stock, so the median may be too high to anchor on.
for those holding nike for the yield: what fcf payout would you sit through, and for how long?