Investors who have watched PepsiCo (PEP 0.46%) for years waiting for a good time to buy the stock have that opportunity right now. That problem is getting past the fact that the stock price has plunged more than 20% from its highs in 2023. But you have to get past the fear that there is something wrong with the business because there really isn't.
Here are three reasons to buy PepsiCo stock today. If you wait until some distant tomorrow, you might miss the opportunity.
1. PepsiCo is an industry giant with a great record
PepsiCo is a Dividend King with 53 annual dividend increases under its belt. The most recent hike came with the announcement of its fourth-quarter 2024 earnings. The increase this year was a reasonable 5%. A company can't build a dividend record like that without having a good business plan that gets executed well in both good markets and bad.
Image source: Getty Images.
Simply put, PepsiCo's dividend history tells you that it is a well-run company. But what does it actually do? It's a consumer staples giant, which means that its products tend to be bought regularly regardless of the economic situation consumers are facing. What it actually makes is food, which is a basic necessity of life.
Its portfolio of iconic brands, which have many loyal fans, spans across beverages (Pepsi), snacks (Frito-Lay), and packaged food items (Quaker Oats). Moreover, it operates on a global scale. So, all in, PepsiCo operates in a reliable segment of the stock market and it has a diversified business.
This is the kind of company that even a conservative investor could buy and comfortably hold for decades.
2. PepsiCo's dividend yield is historically high
Sticking with the dividend theme, PepsiCo's dividend yield is currently 3.5%. That's above the market's 1.2% average, above the average consumer staples stock's 2.8%, and near the highest levels in PepsiCo's history. Using dividend yield as a rough gauge of valuation, PepsiCo's stock looks cheap right now.
Data by YCharts.
That's backed up by more traditional valuation metrics. For example, the price-to-sales, price-to-earnings, price-to-cash flow, and price-to-book value ratios are all below their five-year averages. This isn't one of those times when you have to try to figure out if a stock is cheap or not. PepsiCo is very clearly on sale.
3. PepsiCo's 2025 guidance was light, but still not bad
The problem that Wall Street seems to have with PepsiCo right now is that it had a few really great years during the worst years of the coronavirus pandemic. Its growth was driven by its ability to pass input cost inflation through to consumers. That Goldilocks period came to an end in 2024.
NASDAQ: PEP
Key Data Points
But what exactly does that mean? In 2024, PepsiCo's organic sales grew 2% and earnings rose 6%. That's actually a solid performance for a consumer staples maker given that the industry is basically known for being a slow and steady grower. For 2025, the company projects low-single-digit sales growth and mid-single-digit earnings growth. That's basically a repeat of 2024 -- so another year of reasonable growth. The key for long-term investors is that slow and steady isn't really bad news, particularly if you think in decades and not days.
Don't pass up this opportunity to buy PepsiCo
PepsiCo's stock has fallen into its own personal bear market. The business continues to operate well, so there's really nothing major wrong with the company. The problem is that Wall Street is driven by emotion in the short term and PepsiCo isn't doing as well as it was a few years ago. Every company goes through business swings like this and, really, PepsiCo's fundamental story hasn't changed. If you are a dividend growth investor or even an income-focused dividend investor, PepsiCo looks like it's on sale right now. Don't miss the chance to add this iconic Dividend King to your portfolio.
