The stock market has been volatile at the start of 2025, with many top tech stocks trading well below their highs as some investors question their lofty valuations and an uncertain economic environment. However, even in an uncertain market, investors still have a lot to count on, like beverage and snack company PepsiCo (PEP) and its steady dividend growth. I like PepsiCo stock because of its attractive dividend yield, a long and proud history of growing dividends for decades, its modest valuation, and enduring demand for its products.
There's no doubt that PepsiCo is a blue-chip stock because it's an iconic American company whose name and logo are instantly recognizable to billions of people around the world. However, that doesn't mean the stock is trading above its blue-chip valuation.
In fact, after falling 12.8% over the past year, PepsiCo's stock trades at just 17.8 times full-year 2024 earnings estimates, and is even cheaper at 16.9 times consensus December 2025 earnings estimates. These numbers put PepsiCo's price significantly below the broader market, as the S&P 500 (SPX) currently has a P/E ratio of 24.8 times. Interestingly, PepsiCo is also cheaper than its main rival Coca-Cola (KO), which trades at 20.9 times 2025 earnings estimates.
This bargain valuation should give PepsiCo strong downside protection in a volatile market and leave plenty of room for multiple expansion in a bullish market environment, especially since the stock has frequently traded at higher prices over the years. P/E trading.
In addition to its cheap valuation, PepsiCo is one of the top dividend stocks. First, there's the dividend yield - PepsiCo's current dividend yield is a whopping 3.7%, which is nearly three times the S&P 500's 1.3% yield.
In addition to its above-average yield, PepsiCo is an attractive dividend stock because the company has been paying and growing its dividend for decades. PepsiCo has paid dividends to shareholders for 52 consecutive years and has increased its dividend payout each of these 52 years. This consistency has made PepsiCo the "Dividend King," one of the rare companies to have increased its dividend payments for at least 50 consecutive years. Other notable Dividend Kings include Coca-Cola, Target (TGT), Johnson & Johnson (JNJ), AbbVie (ABBV), and Walmart (WMT).
In a market where few things are certain, it's nice to have a dividend king like PepsiCo that's been increasing its dividend payments every year like clockwork.
Investors are worried that consumer demand for carbonated soft drinks will decline in developed markets such as the United States, but PepsiCo is well prepared to deal with this risk. Carbonated soft drinks have huge room for growth in international and emerging markets. In addition, PepsiCo's portfolio of brands offers a broad range of beverage options, such as Bubly sparkling water, Pure Leaf iced tea and Tazo tea, to consumers in developed markets seeking healthier beverages.
Finally, it's important to remember that Pepsi is more than just a drink, it's the number one player in the lucrative salty snack market, worth more than $250 billion a year, with Doritos, Cheeto's, Lay's, Fritos and everything else in its arsenal Everything was messed up.
Late last year, the company also announced a deal to acquire a 50% stake in Sabra, which it doesn't already own, known for its hummus and other dips and spreads, as well as a $1.2 billion acquisition of the tortilla chip maker The Siete deal signals that the company is eyeing long-term growth in this area.
Another great thing about PepsiCo is that it is a consumer staples company that makes products that meet long-lasting consumer needs. Even in a challenging macroeconomic environment, most customers who prefer Pepsi or Diet Pepsi continue to purchase it during their weekly grocery trips. In an inflationary environment, consumers may be forced to postpone or forego purchasing more tickets, but a six-pack or case of Pepsi or Diet Pepsi still accounts for only a small portion of their budgets that they are unlikely to cut back on.
The same goes for the aforementioned salty snacks sold by PepsiCo or staples like Quaker Oatmeal.
Turning to Wall Street, the analyst consensus rating for PEP stock is a Moderate Buy, based on four buys, three holds, and zero sells over the past three months, as shown in the chart below. After the stock price fell 9% in the past year, PEP's average price target is $167.86 per share, implying an upside potential of 13.6%.
View more PEP analyst ratings
I like PepsiCo because of its attractive, above-average dividend yield of 3.7%, and its long and proud history of increasing dividend payments for more than 50 years. In a market that goes hot and cold and trends change rapidly, this long-term reliability is something to celebrate.
I'm also constructive on PepsiCo stock because of its below-average valuation (which should provide investors with decent downside protection and plenty of upside risk) and its strong business selling consumer staples with enduring demand. This provides the stock with a strong defensive backbone.
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